Online trading has become more accessible for the average person since the rise of the internet. Brokerage houses quickly spotted the opportunity and provided retail traders access to the financial markets via leverage.
Trading financial markets, like the FX market, can be expensive and without leverage simply impossible for the retail trader. Leverage, however, is a double-edged sword – while it enables traders to multiply their position sizes, it also increases the risk involved.
100 Forex Brokers Top Brokers for Leverage
Below is the choice of Forex brokers who provide 500:1 and 400:1 leverage options. Let’s compare!
Do you know another Forex broker that offers the highest leverage of 400:1 or higher?
Please suggest by adding a comment below.
What is Leverage?
Simply put, leverage acts as a multiplier of a trader’s capital. Enabled by the broker, this allows the trader access to markets they would not be able to otherwise trade.
Leverage determines the amount traders move on the actual market. For instance, on a trading account having a leverage of 400:1, traders move on the real market 400 times more than the actual position in their retail account.
How does Leverage work?
Imagine you open a trading account with a broker, and the leverage is 200:1. And, you deposit $1000.
The actual amount you can move on the market is the money deposited in the trading account ($1000) times the leverage size (200). More precisely, $200,000. The broker, therefore, forks the difference in the form of leveraged funds, and the trader can increase the volume, thus the potential reward.
What is Leverage Trading?
Leverage trading increases the accessibility to financial markets by enabling retail traders to trade more significant volumes than otherwise possible. For instance, in a 1:1 leverage trading account, one can move on the market $1 for every $1 in the trading account. That’s not enough to trade multiple positions, and the volume moved would be so small that it won’t impact the value of a trading account.
Without leverage, the margin needed for a trade would often exceed the size of the account, making it impossible for retail traders to participate. In other words, to move $200,000 on the market you’ll need to come up with a deposit of $200,000, whereas only $1000 in a 200:1 leveraged account.
How to Use Leverage Correctly
Money management is key when trading with high leverage. First, it is important to know how much a pip movement affects the trading account. That helps to establish the risk for each trade. Second, make sure that the target exceeds the risk involved.
For instance, if the risk per each trade is 1%, the reward should exceed 1%. For some, the minimum risk-reward ratio for each trade is 1:2, meaning the trading account stands to make $2 for every $1 risked on any given trade. This way, traders avoid the negative effects of leverage and benefit from it.
Is Trading with Leverage Dangerous?
No, if a trader understands the simple basics of leveraged trading.
Yes, if a trader has no clues about what he is doing.
High leverage enables Forex traders to trade larger capitals with multiple types of trades. Without leverage the majority of individual investors won’t be able to operate in the Forex environment today.
Trading with high leverage is riskier than with low leverage. However, this is dependant on your risk management.
Recently regulators stepped in and tightened the conditions for trading with leverage. Of course, the idea is to protect the retail trader, but brokers hope to lower risks by closing the opening positions when there isn’t sufficient capital in the trading account before losses exceed deposits.
Moreover, high leverage accounts leave more free margin available to trade with. This way, traders can find more trading opportunities from a range of markets.
Leverage is one of the reasons why online trading is so popular. Without leverage, many retail traders couldn’t afford to trade.
Moreover, high leverage means less margin is required. This leaves more funds available in the trading account for new trades and potential drawdown.
Tight money management rules coupled with high leverage is the perfect combination for ambitious traders in search of ways to beat the financial markets. One without the other makes it difficult to reach financial independence.
Is low leverage bad?
No. But trading with a broker that offers low leverage decreases the chances to profit the most from the market swings. Put it simply, it takes longer to make a consistent profit.
What skills should I master when using high leverage?
To combine the available margin with the proper risk. High leverage accounts need less margin for a trade, so focus on finding the best money management system that increases the available margin while controlling the risk.
How is the broker protecting my interests against high leverage risk?
By automatically closing positions when the trading capital is insufficient and by offering negative balance protection.
What is the biggest advantage when trading with high leverage brokers?
Increase your ability to trade more markets.
The most important thing to understand about leverage:
Leverage increases trader’s buying and selling ability in Forex by providing VIRTUAL NONEXISTENT capital.
While operating with nonexistent capital is possible, losing it is absolutely impossible. Instead, a trader always loses HIS OWN MONEY.
Why traders opt for higher leverage?
With little investment and high leverage a trader can trade, for example, not just 1000 unit lot and earn $0.10 for each pip, but go for 10 000 unit lot, where he will earn $1 dollar per pip. High leverage provides the opportunity to earn higher profits.
BUT, only those trades who seriously takes the subject of FINANCIAL RISKS and MONEY MANAGEMENT are able to benefit from highly leveraged trading. They can confidently take the highest possible leverage of 500:1 and be successful in their everyday trading.
Other, less careful Forex adventurers, blinded by the opportunity to earn high profits in Forex with reasonably small investments can easily get themselves into their own trap of uncontrolled large lot size trading, which will lead to quick account blow up.
What is a “Stop Out level”?
Stop Out level is a certain required margin level in %, at which a trading platform will start to automatically close trading positions (starting from the least profitable position and until the margin level requirement is met) in order to prevent further account losses into the negative territory – below 0 USD.
Some Forex brokers use only with Margin Calls, where a Margin Call = Stop Out level at the same time,
others define separate Margin Call and Stop Out levels.
More details at: Margin Calls vs Stop Out levels in Forex
For more brokers of different trading conditions, we’ve pulled together the best brokers for each:
- Tightest spreads
- Guaranteed stop losses
- CFD brokers
- 5-decimal trading (most brokers now offer this)
- Fast execution brokers
- Best brokers for scalping
- Best brokers for trading the news