Brokers With High Leverage

Brokers with high leverage offer the opportunity to profit at a greater rate than an initial deposit would usually allow. In this article, we list the best brokers with the highest leverage, explain the pros and cons of trading on margin, as well as the global regulations in place.

What Is Leverage?

Leverage gives investors the ability to multiply the results of a trade. Brokers with high leverage allow traders to borrow funds to increase their deposit value. This is then used to open larger positions than would have been achieved with a single source of funds. The trader earns all the profit from a leveraged trade, but they also assume all the risk.

Leveraged Trading Example

Let’s say a client starts with a $1,000 deposit and their broker offers 20x leverage (1:20), the trader can execute positions up to a value of $20,000. So, if they purchase $20,000 worth of gold and the value of gold rises by 10%, they earn $2,000 in profit ($20,000 * 1.1 = $22,000). But if they had purchased $1,000 worth of gold without leverage and the value increased by 10%, their profit would be $100 ($1,000 * 1.1 = $1,100).

It’s important to note that while profits are amplified, so too are losses. Therefore, leveraged trading is a high risk, high reward strategy.

Regulations

Since leveraged investing is a risky strategy, there are regulations in place to protect retail traders. The rules vary by asset (forex, stocks, CFDs, etc) and by regulatory authority, so limits may differ between brokers based in the US and UK vs other nations, for example. With that said, regulated brokers with high leverage generally offer services within the limits set out below.

The top 100 regulated forex brokers with high leverage are usually authorised by the following bodies: ASIC in Australia, CySEC in Europe, and the FCA in the UK. These generally all have the following limits on leveraged CFD trading:

• 1:30 – Major forex pairs, such as GBP/USD, CHF/USD and EUR/GBP
• 1:20 – Minor forex pairs, gold and major stock market indices, such as NASDAQ, S&P 500 and FTSE 100
• 1:10 – All other commodities and minor stock market indices
• 1:2 – Crypto assets such as Bitcoin
• 1:5 – Stocks and shares

Brokers with higher leverage than those referenced may not be regulated with a reputable authority. However, those opting for unregulated brokers may find retail leverage rates up to 1:1000.

Note, the Commodity and Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) in the US restrict margin trading on CFDs for American clients.

Retail Leverage Vs Professional Leverage

The restrictions listed above are only relevant to retail traders. The highest leverage rates are available to professionals. Brokers with this account type will place stringent requirements on traders, who must prove they have the funds and experience to operate with the increased risk. But for those that do meet the threshold, a leveraged investing strategy can result in higher profit margins.

Benefits of a professional account include:

• Larger position sizes – Ability to place larger trades in one go
• High rates – Usually around 1:500 for forex pairs and 1:200 on indices
• Advanced customer support – 24/7 helplines or a dedicated account manager
• Credit facilities – Some brokers offer additional credit services for professional traders
• Market execution – Many true ECN brokers with high leverage and low spreads also provide market execution (as opposed to instant execution, usually implemented by market makers)

Examples of professional account requirements include:

• High balance and turnover thresholds – For example, eToro requires clients requesting professional accounts to demonstrate at least two of the following funding capabilities:
  • Balance sheet total, at least 20,000,000 EUR
  • Net turnover, at least 40,000,000 EUR
  • Own funds, at least 2,000,000 EUR
• Professional knowledge – Some brokers may ask you to take a test or prove that you’ve worked in the financial industry as an institutional trader for at least one year
• Proof of significant investing activity – Others may look to your previous activity to show you’ve made at least 10 or more significantly sized trades in the last year

Pros Of Brokers With High Leverage

Selecting a broker with high leverage opportunities means that traders have access to multiple benefits:

• Increased position size – Larger positions mean you can increase profits beyond what your deposit amount would usually allow. This allows for greater market exposure and potentially larger profits.
• Opportunity to diversity portfolios – Larger positions on a single trade means deposit capital that is not fully utilised can be used elsewhere to diversify a portfolio, for example, trading on forex as well as stocks, commodities and cryptocurrencies.
• Margin adjustments – Even if you open an account with a broker that offers high leverage, you can usually manually adjust the rate should you wish to decrease your risk exposure. Customer support teams can also often help change your leverage.

Cons Of Brokers With High Leverage

There are limited downsides to selecting a broker with high leverage. Margin trading is always optional, so even if your broker provides the service, you don’t have to utilise it if it doesn’t suit your strategy. With that said, the following factors should be considered when trading with high leverage:

• Increased risk – While profits are multiplied, so too are losses. Therefore, traders should be prepared to lose their entire deposit amount plus additional capital if they do not have negative balance protection.
• Less suitable for beginners – Beginners may prefer to start investing without leverage to gain confidence in their strategy before executing higher-risk trades.

Final Word On Brokers With High Leverage

In this article, we’ve explained what leverage is and how it can be used to benefit your strategy. Our list of the best brokers with high leverage opportunities is a great place to get started.

Beginners may want to consider opening a demo account before placing real positions since leveraged trading can be risky. However, for those that are ready to make money at a faster pace than their current deposit allows, margin trading can be a big advantage.

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