Margin trading means that investors can conduct large transactions beyond their own financial strength by providing only a part of the funds as a deposit, which improves the utilization rate of funds. In general, the deposit can be regarded as a down payment. You only need to pay a certain deposit before you can have the right to trade goods. The ratio of margin is the leverage ratio.

The relationship between leverage and profit rate

The total amount of a transaction divided by the margin ratio is leverage, and leverage and margin are negatively correlated. In market transactions, the relationship between leverage and margin is close. The greater the leverage, the smaller the margin occupied by the transaction, and the smaller the leverage, the larger the margin occupied by the transaction.

Leverage multiple = 1/ margin ratio. If the margin rate is 0.5%, then leverage = 1/0.5%=200 times.

For example, at present, the gold price is 1 0,800 USD/oz, 1 gold in hand = 1 0,000 oz, and the margin ratio is 0.5% (actually calculated according to the standard of account opening brokers), so the margin is = 1 0,800×1.

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