Brokers With High Leverage

Brokers with the highest leverage rates allow clients to amplify potential profits with limited capital outlay. However, trading with leverage is risky so regulated platforms generally cap rates depending on the market, for example, forex or stocks. In this article, we list the best brokers with highly leveraged trading solutions. We also cover how to compare trading platforms and manage risk.

How Leverage Works

Leverage involves traders depositing an amount of capital (the margin) in return for increased market exposure. Brokers essentially loan funds to clients so they can take larger positions, amplifying potential profits. However, leverage is a double-edged sword with losses also magnified if the market moves against you. As a result, brokers with substantial leverage offer a high risk/high reward trading experience.

Example

Let’s say your broker offers leverage of 1:100 on a Tesla stock CFD…

If a trader decides to deposit $100, their total position size will be $10,000 (100 x $100).

Now because their order is 100x their original position, so too are their potential returns. What would have been a $5 profit with their original trade is now $500 (100 x $5).

Equally, should the market move against them, the investor could lose $500 (100 x $5).

While in this example we have used a leverage rate of 1:100, some firms offer up to 1:1000 and even 1:2000 to qualifying retail investors.

Regulation

As shown in the example above, signing up with brokers that offer high leverage comes with increased risk. Not only could you lose your initial deposit, but if the company doesn’t offer negative balance protection, then you could end up owing the company money.

For these reasons, financial regulators around the world, including the CySEC in Europe, the ASIC in Australia, the FCA in the UK, and the CFTC in the US, impose maximum leverage ratios and margin requirements to protect traders from excessive losses.

Maximum leverage ratios vary depending on the regulator. Thresholds also depend on the broker and the type of asset being traded – riskier and more volatile assets like cryptocurrency generally have lower maximum leverage rates.

Common thresholds enforced by trusted regulators are:

• Major forex pairs – 1:30
• Minor forex pairs – 1:20
• Stock indices – 1:20
• Commodities – 1:10
• Shares – 1:5
• Crypto – 1:2

Despite this, many of the top 100 regulated stock, forex and commodity brokers have offshore entities where they offer the highest leverage rates in return for less protection. Margin requirements are generally lower, account safety measures are limited and regulatory recourse options are few and far between.

Professional Traders

Another option for aspiring investors is to qualify for ‘professional trader’ status. In return for demonstrating previous financial experience and a sizeable account balance, clients may be able to trade with higher leverage, for example up to 1:500, while retaining various regulatory protections.

Professional eligibility criteria at most top brokers includes:

• Trading leveraged derivatives in substantial sizes over the last 12 months
• Holding an investment portfolio worth $500,000
• Experience working in financial services, including in a position requiring knowledge of derivatives trading for at least 12 months

Managing Risk

Before registering with a broker that offers highly leveraged trading, it is important to have a handle on risk. Consider these tools:

Demo Account

Demo accounts are an excellent way to test a leveraged trading strategy before risking real funds. These are particularly important for novice traders. Paper trading accounts are usually free and investors can place as many trades as they like before upgrading to a real-money account.

Hedging Strategy

As well as buy (long) positions, leverage can also be used on sell (short) positions. Traders can offset the risk posed by a position by taking an opposing position in a corresponding market. Unsurprisingly, this requires careful planning to ensure you don’t cancel out potential returns.

Advanced Market Orders

Experienced traders may turn to advanced market orders to exercise control over open positions. A common option is a stop-loss order, which is an order to buy or sell once an asset reaches a particular price point. A trailing stop-loss is similar and lets you set a maximum amount or percentage of a loss that you can incur on a trade.

Benefits of Brokers With High Leverage

• More accessible – traders with limited capital can take larger positions than they would otherwise be able to. So if the market moves in your favor, your profits will be higher than if you had used a broker without leverage
• Negative balance protection – if your broker has negative balance protection, you cannot owe more than your initial deposit – limiting potential losses
• Diversify portfolios – because traders do not need to deposit as much to gain the same amount of exposure, remaining capital can be used to invest in other assets
• ECN brokers – true ECN (Electronic Communication Network) brokers often offer high leverage alongside tight spreads and a superior trading experience

Drawbacks of Brokers With High Leverage

• Risk – for the same reason that leverage can lead to higher profits, it can also lead to magnified losses
• Beginners – due to the increased risk exposure, brokers with high leverage are less suitable for new traders
• Regulation – regulators have taken a tougher stance on leverage in recent years, which has limited the freedom of brokers and, therefore, the choice for traders. In particular, forex brokers with high leverage that accept US clients are limited

How to Compare Brokers With High Leverage

Fees

In addition to the usual fees associated with trading such as commissions, deposit and withdrawal fees, a particular consideration for swing traders using leverage is overnight fees. As leverage involves the broker lending the trader money, interest is often charged in the form of rollover fees.

Trading Platform

MetaTrader 4, MetaTrader 5 and cTrader are among the most popular retail trading platforms. Online brokers may offer a particular one or a selection of these terminals. Importantly, the best trading platforms provide more sophisticated features, such as algorithmic trading, interactive charts, drawing tools and advanced market orders.

The top trading platform may also depend on your choice of leveraged asset. For example, MetaTrader 4 is the leading solution for forex trading and is supported by many of the best brokers.

Assets

Maximum leverage ratios are often defined by the trader’s choice of asset. Major forex pairs will generally attract higher leverage ratios than crypto, for example. Make sure that your chosen broker offers the asset you want to trade. The best brokers will generally offer most, if not all, of the following: forex, indices, shares, commodities and cryptos.

Trade Execution

When trading with leverage, small price movements can have a significant impact on returns. As a result, it’s important your broker offers fast, high-quality executions. At leading platforms, if the price changes between the time the order is placed and the time it is executed (slippage), the broker will give the trader the best available price closest to the order price. This system does not involve re-quotes and can often mean faster trade executions.

Margin Requirements

Many brokers regulated by the likes of the FCA and CySEC impose rules on the level of funds needed for margin trading. The FCA, for example, say that funds in a trader’s CFD account must not fall below 50% of the margin needed to maintain their open positions. If funds do fall below this level, the broker may issue a margin call, which is a request from the broker to the trader to deposit more funds. Failure to do this may result in positions being automatically closed.

When choosing brokers with high leverage, ensure you are familiar with the margin account requirements.

Negative Balance Protection

The best brokers with high leverage offer negative balance protection, meaning you will never owe money to the broker. With that said, negative balance protection does not mean you are protected from losses – you can still lose all the money in your account. Brokers regulated in some jurisdictions, including Europe and the UK, are obliged to offer negative balance protection.

Customer Support

When online trading, you will probably want a provider that you can contact quickly should you encounter any issues. Markets move fast so a live chat feature can prove particularly useful. Check that you can also contact the broker by email or phone.

Bottom Line on Brokers With High Leverage

High leverage rates are now available at many online investing platforms and discount trading brokers. Although firms with the highest leverage carry significant risk, they also offer opportunities to generate larger profits. Use our pointers above to start trading today.

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