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Wednesday, April 11, 2012

How does the commodity trading scenario work using leverage?

A client places funds into their client account which will be lodged under the client's own name within the platform that the client has 24 hour access to via a portal. This money is normally USD as this is the currency that all of the major indices work with. They can, however, accept Sterling.

Using a figure of £10,000 pounds, which converts currently to about $15,700, here is an example:

The $15700 which the client can use to either purchase a position of that value or leverage up to a 4 to 1 basis enabling him to purchase up to $62,800 worth of product (Gold, Silver, Platinum, Palladium or Copper) .

The average trade works by a client depositing funds with the company that can only be traded on a non discretionary basis meaning that the client retains complete control on how his money is being invested.

The minimum deposit is $6000 for a client to enact a leveraged trade. This is because of the fact that each commodity traded has varying entry levels. Gold, platinum and palladium are 10oz minimum while silver is 500 oz and copper is 2 tons.

As the minimum deposit is 25% on any of these, a simple calculation determines the minimum investment or deposit required. I.e. 10 oz of gold costs around $17000. With 2% commission of $340 that brings the total cost to $17340 which is multiplied by 25% to establish the deposit required for this trade which in this case is $4335. The money that is left over i.e. the $1665 remains in the clients unallocated funds account. As his trade creates profit, and therefore excess equity, he can move more money to the unallocated funds enabling him to carry out another trade if he wishes even while the original trade is still going.

If the client merely wishes to have an outright purchase and delivery or an outright purchase with storage, then he needs to ensure that the company has sufficient funds on account to cover those costs associated. i.e. the purchase price and money for storage (typically 0.1% per month of value of commodity) for a period of time.

To begin right away, clients should send an email to

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