Leverage allows gold traders to control larger positions using smaller amounts of capital. The document discusses how leverage increases profits and losses for a $1,200 trading account using 100:1, 50:1, and 20:1 leverage. With 100:1 leverage, a 100 pip profit yields a 10% return while a 100 pip loss results in a 10% loss. Lower leverage of 50:1 and 20:1 reduce profit/loss percentages. The document also covers margin requirements, free margin, used leverage, and different methods for setting stop-loss orders in gold trading.

1. Leverage Increases
Gold Trading

2. POINTS TO BE COVERED TODAY:
HOW LEVERAGE INCREASES GOLD
TRADING PROFITS AND LOSSES
GOLD LEVERAGE AND MARGIN
TRADING EXPLANATION AND
EXAMPLES
METHODS OF SETTING STOP LOSS
ORDERS IN GOLD TRADING

3. How Leverage Increases Gold Trading
Profits and Losses
If you have a 1,200 dollars trading account with leverage 100:1 you can buy a maximum
of 1 lot which is equal to 120,000 dollars Gold contract (1 Standard lot).
Let us calculate trading profits and losses based on three examples of used leverage,
based on $1,200 Gold trading account:
1 lot (100:1)
0.5 lots (50:1)
0.2 lots (20:1)
NB: This is the Leverage used not the Maximum leverage, If an online Gold broker gives
you 100:1 leverage, but you only trade 0.1 lot the used leverage you are using is 10:1,
But if you trade 1 contract then the you will use is 100:1 which is equal to Maximum
leverage(100:1).

4. Leverage Used Based On The Volume
Of The Trade
(100:1 Leverage or 1 Lot)
For 1 lot 1 pip equals $ 1
If you make a profit of 100 pips the calculation of profit in dollars is:
1 lot
1 pip = $1
100 pips = 100 * 10 = $100
Total= balance + profit
= 1000+ 100
= $1,100 you have just made 10% profit in your trading account balance.
If you make a loss of 100 pips the loss in dollars is:
1 lot
1 pip = $1
100 pips = 100 * 10 = $100
Total= account balance - loss
Total= 1000 - 100
Total = $ 900 you have just lost 10% of your trading account balance

5. Leverage Used Based On The Volume
Of The Trade -I
(50:1 Leverage or 0.5 Lots)
For 0.5 lots 1 pip equals $ 0.5
If you make a profit of 100 pips the profit in dollars is:
0.5 lots
1 pip = $0.5
100 pips = 100 * 0.5 = $50
Total= balance + profit
= 1000+ 50
= $1,050 you have just made 5% profit of and added it to your trading account balance
If you make a loss of 100 pips the loss in dollars is:
0.5 lots
1 pip = $0.5
100 pips = 100 * 0.5 = $50
Total= account balance - loss
Total= 1000 - 50
Total= $950 you have just lost 5% of your trading account balance

6. Leverage Used Based On The Volume
Of The Trade -II
(Leverage 20:1 or 0.2 Lots)
For 0.2 lots 1 pip equals $ 0.2
If you make a profit of 100 pips the profit in dollars is:
0.2 lots
1 pip = $0.2
100 pips = 100 * 0.2 = $20
Total=balance + profit
= 1000+ 20
= $1,020 you have made lost 2% of your trading account balance
If you make a loss of 100 pips the loss in dollars is:
0.2 lots
1 pip = $0.2
100 pips = 100 * 2 = $20
Total= account balance - loss
Total= 1000 - 20
Total= $980 you have just lost 2% of your trading account balance

7. Leverage Used Based On The Volume
Of The Trade -III
From the example given in previous slide you can see that the more leverage you use the
greater the profit or loss and the less leverage you use the lesser the profit or losses.
 It is therefore better to use less leverage so as to minimize the risks involved in online
trading of Gold metal. The higher the leverage used the higher the risk. This is one of the
money management leverage rules not to trade with more than 5:1 leverage at any one
given time.
 In money leverage rules: It is always advisable to stay below 10:1 leverage which is still
high, most professional money managers use 2:1 leverage meaning they trade only 2 lots
for every $120,000 in their Gold trading account. Therefore, to trade one lot these money
managers will have $60,000 as their account balance.
As a trader the minimum you should open a Gold trading account with is $10,000 dollars if
you will be trading Gold Standard lots. If you will be trading Gold Mini Lots then the
minimum you should open a Gold trading account with is $1,000 or $2,000.

8. Gold Leverage And Margin Trading Explanation And
Examples
 Margin required: This is the amount of money your broker requires from you to open a position. It is expressed in percentages.
 Equity: This is the total amount of capital you have in your Gold trading account.
 Used margin: The amount of money in your trading account that has already been used up when buying a Gold contract, this Gold contract
is the trade transaction that is displayed in the open positions. As a trader you cannot use this amount of money after opening a trade with it
because you have already used it and it is not available to you - until when you close your open position.
 In other words, because your broker has opened up a position for you using the capital that you have borrowed, you must maintain this used
margin for trading as a security to allow you to continue using this leverage that the broker has given you.
 Free margin: The amount of money in your trading account that you can use to open new positions. This is the amount of money in your
account that has not yet been leveraged because you have not yet opened a transaction with this money - this margin is also very important
for you as a trader or investor because it enables you to continue holding your open trades as will be explained below.
 However, if you over use leverage, this free margin will drop below a certain percent at which your broker will have to close all your positions
automatically, leaving you with a big loss. The broker at this point closes all your position because if your positions are left open the broker
would lose the money you have borrowed from them.
 This is why you should always make sure you have a lot of free margin. To do this never trade more than 5 percent of your trading account
balance, in fact 2 percent is recommended.

9. Difference between Leverage Set by the Broker
and Used Leverage
If the set leverage is 100:1, it means you can borrow up to 100 dollars for every dollar you have but you do not
have to borrow all the 100 dollars for every dollar you have you can decide to borrow 50:1 or 20:1.
In this case even though the leverage option set 100:1 your used leverage will be the 50:1 or 20:1 that you have
borrowed to make a transaction.
Example:
You have 1200 dollars (Equity)
Leverage set 100:1
Leverage Used = Amount used /Equity
1 Contract - $120,000
If you buy one standard lot which is equal to 120,000 dollars you will have used
= 120,000/1200
= 100:1

10. Difference between Leverage Set by the Broker
and Used Leverage - I
0.5 Contract, $50,000 Mini Lot
If you buy one 0.5 lots which is equal to 60,000 dollars you will have used
= 60,000/1200
= 50:1
0.2 Contract, $20,000 Mini Lot
If you buy one 0.2 lots which is equal to 24,000 dollars you will have used
= 24,000/1200
= 20:1
0.1 Contract, $10,000 Mini Lot
If you buy one 0.1 lots which is equal to 12,000 dollars you will have used
= 12,000/1200
= 10:1
In these three cases you can see that even though the set leverage is 100:1 - The used is 100:1, 50:1, 20:1 and 10:1 depending on the size of lots traded.

11. Why not just Choose 10:1 option as
the Maximum Leverage?
Because to keep within the proper risk management rules it is even recommended that investors use less than this?
This question may seem straight forward but it's not, because when you trade you use borrowed money known A.K.A.
Leverage.
When you borrow capital from anyone or a bank you must maintain a security or collateral to acquire a loan, even if
the security is based on monthly deduction from your salary, the same thing with Gold Trading and Online Trading.
 In online trading the security is known as margin- your deposit. This is the capital you deposit with your broker.
 This is calculated in real time as you trade.
To keep your borrowed money you must maintain what is known as the required capital (your deposit). Now if Your
Leverage is 100:1
 When trading - if you have $1,200 and use option 100:1 and buy 1 standard lot for $120,000 your margin on this
transaction is the $1200 dollars in your account, this is the money that you will lose is your open transaction goes
against you the other $118,800 that is borrowed from your broker, they will close the open transactions automatically
once your $1,200 has been taken by the market.
 But this is if your broker has set 0% Margin Call Requirement before closing your trades automatically.

12. MARGIN CALL REQUIREMENT
For 20% Margin Call requirement before closing your trades automatically, then your transactions will be
closed once your balance gets to $240 For 50% Margin Call requirement of this level before closing your
trades automatically, then your transactions will be closed once your balance gets to $600.
 If they set 100% Margin Call requirement of this level before closing your open positions automatically,
then your trade will be closed once your balance gets to $1,200: Meaning the trade will close out as soon
as you execute it because even if you pay 10 pip spread your account balance will get to $1,190 and the
needed percentage is 100% i.e. 1,200 dollars, therefore your orders will immediately get closed by margin
call.
 Most brokers do not set 100% Margin Call requirement, but there are those that set 100% Margin Call
level and these are not suitable for you at all, choose those set 50% or 20% margin requirements, in fact,
those that set at 20% are the best because the likely hood them closing out your trade is reduced as
shown in the examples above.
 To know about the margin level that you will have used - these are calculated by your platform
automatically - The Meta Trader 4 Platform will display this as "Margin Requirement", this will be
displayed as a percentage the higher the percentage the less likely your trades are to get closed.

13. MARGIN CALL REQUIREMENT - I
For Example if
Using leverage 100:1
If leverage is 100:1 and you transact 1 Mini Lot, equal to $12,000
$12,000 dollars (mini lot) divide by 100:1; your used capital is $120
Calculation:
= Capital Used * Percentage (100)
= $1,200/$120 * Percentage (100)
Margin Requirement = 1000 %
Investor has 980% above the required amount (because margin call level is 20%)
Using 10:1
If leverage is 10:1 and you transact 1 Mini Lot, equal to $12,000
$12,000 dollars (mini lot) divide by 10:1; your used capital is $1200

14. MARGIN CALL REQUIREMENT - II
Calculation:
= Capital Used * Percentage (100)
= $1,200/$1200 * Percentage (100)
Margin Requirement = 100 %
Investor has 80% above the required amount (because margin call level is 20%)
Because when a trader has a uses higher leverage - it means that they have more
percentage above what is required (A.K.A. More "Free Margin") their open transactions
are less likely to get closed by a margin call as explained above. This is the reason why
investors will choose the option 100:1 for their trading account but according to their risk
management rules, they will not trade above 5:1.
These Margin levels explained above are shown on the MetaTrader 4 platform and traders
can find them as shown below while trading Gold with the Meta Trader 4 platform.

15. Methods Of Setting Stop Loss Orders In Gold
Trading
Traders using a Gold trading system must have mathematical calculations that reveal where their stop loss
order must be placed.
 A Gold trader can also place a stop loss order according to the technical indicators used to set these stop loss
orders.
Certain technical indicators use mathematical calculations to calculate where the stop loss orders should be set
so as to provide an optimal exit point when trading Gold.
 These chart indicators can be used as the basis for setting these stop loss orders.
 Other online Gold traders also place these stop loss orders according to a predetermined risk: reward ratio.
This method of setting these orders is dependent upon certain mathematical calculations based on XAUUSD
chart price movements. For example a ratio of 50 pips stop loss can be used by a Gold trader if the trade has
the potential to make 100 pips in profit; this is a risk reward ratio of 2:1.
 Also, a ratio of 30 pips stop loss can be used by a Gold trader if the trade has the potential to make 90 pips in
profit; this is a risk reward ratio of 3:1
 Other traders just use a predetermined percentage of their total trading account balance.

16. Percentage Of Trading Account Balance
This method is based on the percent of the account balance that the trader is willing to risk on any one
single XAUUSD trade.
If a Gold trader is willing to risk 2% of their trading account balance - then the trader determines how far he
will set the stop loss order level based on the position size that he has bought or sold.
Example:
If a trader has a $100,000 account and is willing to risk 2%
If the trader buys 5 contracts
1 pip = $5
Then setting at 2 %
2% is $ 2,000
2000 /5 = 400 pips
Stop loss = 400 pips

17. Setting Stop Loss Using Support And
Resistance Levels
Another way of setting stop loss orders is to use supports and resistance levels, on the
XAUUSD trading charts.
 Given that stop loss orders tend to congregate at key points, when one of these support
or resistance levels is touched by the price, other orders are set off, like dominos.
Stop loss orders tend to accumulate just above or below the resistance or support levels,
respectively.
 A resistance or a support level should act like a barrier for XAUUSD price movement, this
is why they are used to set stop losses, if this barrier is broken then the XAUUSD price
movement can go towards the opposite direction of the original Gold price trend, but if this
barriers (support and resistance levels) are not broken, then the XAUUSD price will
continue moving in the intended direction.

18. Setting Stop Loss Orders Above The
Resistance Level

19. Setting Stop Loss Orders Below The
Support Level

20. Setting Stop Losses Using Trend Lines
A trend line can be used to set stop losses where the order is set just below the
trend line in an upward trend and above the trend line in a downward trend.
 As long as the trend line holds then a Gold trader will be able to continue
making profits while at the same time setting this stop loss order that will lock
his profit once the trend line is broken.

21. Setting The Stop Loss Order Below The
XAUUSD Price Trend Line

22. Leverage Increases
Gold Trading

23. THANKS FOR LISTENING
LEVERAGE INCREASES
GOLD TRADING