Leverage

Leverage allows you to hold a larger positions than your initial cash deposit would otherwise allow. Your deposit is multiplied or leveraged by your broker to increase the value of your underlying investment. The higher the level of leverage applied then the larger the position a trader can hold open, for the same size of initial deposit.

Leverage or gearing can raise the potential for high returns when the market moves in your favour. However, you should note that leverage will act against you if and when the market moves in the opposite direction to your prediction.

When an investor opens an account with a broker, an initial deposit is required in order for the investor to be able to open a position in the market. This cash deposit acts as a buffer to cover any credit risk / market movement. Depending on their agreement, the investor will allowed by the broker to leverage their deposit up to a predetermined limit.

Precious Metals Trading Examples

Silver (XAG / USD)
Profit / Loss Calculation Formula:

Profit Calculation Against US Dollars
(Sell Price - Buy Price) X Contract Value X No. of Contracts Less (+/-) Interest = Profit / Loss

Local London Silver (XAG)

Example:

Transaction: Sell 3 contracts of Spot Silver and settle on the same day.

Sell Price: US$ 22.30 per troy ounce

Buy Price: US$ 22.20 per troy ounce

Contract Value: 5,000 troy ounce

Calculation of Profit and Loss: (22.30 - 22.20) X 5,000 X 3 = US$ 1,500

Interest Calculation Formula

Interest Calculation Against US Dollars
(Closing Price X Contract Value) X (+/-) Interest rate / 360 X No. of day X No. of Contracts = Interest earned / Interest paid

Local London Gold (XAU)

Example :

Transaction: Sell 3 contracts of Spot Gold and leave the position open for 1 month in 1st May. Assuming there is no change in Spot Gold price and interest is earned.

Closing Price: US$1 550 per troy ounce

Interest Rate: + 4.0% per annum

Contract Value: 100 ounces

Interest Earned: (US$1550 X 100) X 4.0% / 360 X 30 X 3 = US$ 1550


Note: Interest is not required to be paid on the borrowed amount, but if the investor decides to hold his position overnight, interest will be charged as the rolled over rates on the total positions held.

Margin Requirement

Commodities Code Contract Size Margin Spread Pip price
Local London Gold / USD XAU/USD 100 Troy ounce USD1,000/Lot 0.5 USD 0.1 = USD10
Local London Sliver / USD XAG/USD 5,000 Troy ounce USD1,000/Lot 0.04 USD 0.01 = USD50
Platinum / USD XPT/USD 50 Troy ounce USD1,000/Lot 3 USD 0.1 = USD5
Palladium / USD XPD/USD 100 Troy ounce USD1,000/Lot 5 USD 0.1 = USD10

• The spread amount is not guarantee and can be changed if market moves rapidly (such as large currency interventions). SGCM has the right to adjust spreads without prior notice to the Client.

• Margin Requirement can be changed and increase according to market fluctuation. Client agrees to deposit by immediate wire transfer such additional margin when and as required by the SGCM.

• SGCM entitled to the market situation follow changes in market conditions to adjust margin requirements and trading spread.

Margin Call

A Margin Call is a level nominated by a brokerage that sets out the minimum amount of money required to trade in the market. If your account falls below the margin call level, you will need to make a further deposit in order to maintain your open positions. Or should you prefer you can close some of your outstanding positions to reduce your margin requirement.

Stop Out Level

In the event that you are unable to maintain sufficient funds in your account after reaching the Margin Call level, and if the value of your account subsequently depreciates to the Stop Out level, your positions will be closed automatically, in order to prevent further losses to your capital.