Leverage is important in forex and CFD trading as it allows you to amplify your market exposure. So, when choosing a trading platform, it’s crucial to find out how much leverage is on offer. At forex.com, the amount of leverage you can access depends on the instruments that you’re trading and the country that you’re based in. Here’s a look at how it works.
Maximum leverage at forex.com
In the UK, forex.com offers the following leverage limits for retail traders:
- Major currency pairs – 30:1
- Minor currency pairs, major stock market indexes, gold – 20:1
- Commodities other than gold and minor stock indexes – 10:1
- Individual stocks – 5:1
So, the maximum leverage ratio is 30:1, which translates to a margin of 3.3%. This means that you can potentially control a position worth up to 30 times the initial deposit required to open the trade.
How does leverage on forex.com differ between the UK, US, and Australia?
In the US, leverage limits on forex.com are as follows:
- Major currency pairs – 30:1
- Minor currency pairs – 20:1
Note that CFD trading is banned in the US. You can find more information on maximum leverage for US and Canadian traders here.
In Australia, leverage limits on forex.com are the same as the UK limits. So, traders are looking at maximum leverage of:
- Major currency pairs – 30:1
- Minor currency pairs, major stock market indexes, gold – 20:1
- Commodities other than gold and minor stock indexes – 10:1
- Individual stocks – 5:1
However, traders in Australia can also use leverage on crypto-assets (this is banned in the UK). Here, the maximum leverage ratio is 2:1.
Does forex.com offer higher levels of leverage for professional traders?
Yes, it does. If you open a Professional Trader account with the broker, you may be able to obtain leverage ratios of up to 400:1.
To qualify for a Professional Trader account, you need to meet two of the following three criteria:
- You have placed a minimum of 40 significantly sized trades within the last year.
- You have a financial instrument portfolio of at least €500,000 or equivalent.
- You have worked in a professional position in the financial sector for a minimum of one year.
What is leverage in FX trading?
Leverage in forex trading is a tool that allows you to control a larger trading position than your initial deposit. You can think of it like a loan from your broker that enables you to trade with more money and potentially generate larger profits.
When discussing leverage, traders often talk about leverage ratios. These measure the amount of money a trader can control relative to their initial investment. If a platform offers a maximum leverage ratio of 3:1, a trader with £1,000 can potentially control up to £3,000 on a trade. If it offers a maximum leverage ratio of 50:1, the trader can potentially control up to £50,000 with £1,000.
What are the risks of using leverage?
Using leverage in trading is very much a double-edged sword. This is due to the fact that it can magnify both gains and losses. If you use a large amount of leverage on a trade, even a small price movement in the wrong direction can result in substantial losses. Therefore, you need to be very careful when using it and have robust risk management measures in place.
What is margin?
Margin and leverage in forex trading are closely linked. Margin refers to the amount of money that you need to deposit in a trading account in order to place a trade using leverage and maintain the position. Its purpose is to ensure that you have a sufficient balance in your account relative to the size of your trading positions. Ultimately, it acts as a form of collateral for the broker.
In forex trading, margin is essentially the inverse of leverage. So, if a platform offers a forex margin of 1%, then the leverage ratio available is 100:1. Similarly, if the platform offers a forex margin of 5%, the leverage ratio available is 20:1.
Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
Widely recognized as a sought-after investment expert, Edward’s insightful perspectives and analyses have been featured on sites such as BlackRock, Credit Suisse, WisdomTree, Motley Fool, eToro, and CMC Markets, among others.
You can contact Ed at edward@goodmoneyguide.com
