As the forex industry has evolved, several features have been introduced to help traders increase their profitability. Leverage is one of those features, which is popular because it amplifies traders’ profits (and losses, so beware). Leverage involves borrowing money from a broker to increase the amount you can invest based on your smaller stake.
This guide describes leverage in more detail and explains the key factors to keep in mind when looking for a forex broker for high leverage.
Our list of the Forex Brokers for High Leverage
What is a Forex Broker for High Leverage?
Forex brokers are intermediaries that provide traders with the ability to buy or sell currency pairs online. The broker’s trading platform is the interface between a trader and a “market maker” broker or between a trader, a broker, and the interbank forex market— for electronic communications network (ECN) or straight-through processing (STP) brokers.
No retail or individual forex trading was available until the mid 90's. Until then, the forex market was exclusively for large banks, hedge funds, or high net worth firms that could meet the minimum trading size of $1 million.
Over time, the market was decentralized and access was given to investors with less capital. The smaller capital of retail traders creates a liquidity gap, so market makers fill the greater trading amounts required by the interbank market.
How Does a Forex Broker for High Leverage Work?
When trading forex, money is borrowed from a broker, allowing traders to place trades with a larger volume. Different brokers offer different levels of leverage to traders. For example, a broker may require you to deposit 1% of the total trading amount as a margin to trade the EUR/USD pair, which would mean depositing $1,000 to take a $100,000 trade.
Although many forex brokers allow high leverage amounts like 1:1000, some regulators do not allow more than 1:30 or 1:50 leverage for residents of specific territories. Such restrictions are imposed to protect the traders’ capital, but traders should be wary about high leverage in any case because leverage amplifies losses as well as profits.
Key Features to Look for in a Forex Broker for High Leverage
Leverage is an important factor that may help you to make money in online trading. However, there are other key features that a trader must consider before choosing a forex broker. We have listed some important features as follows.
It is very important to notice whether a broker is regulated or not, and the body that regulates the broker. Brokers regulated by the FCA (UK), ASIC (Australia), and NFA (United States) are considered highly trustworthy as the compliance rules are very strict, so there is virtually no chance of scam.
Always look for a broker that offers transparent pricing and does not trade against you. The broker should keep straightforward rules and strictly abide by the financial regulations.
The forex broker that offers diverse markets to trade is preferred because traders can access and trade indices, equity derivatives, and cryptocurrencies in the same platform as forex.
A broker that offers a lower margin (hence higher leverage) is preferred by experienced traders because it increases their buying power. However, amateur traders should be cautious of high leverage.
A Forex broker that provides regular market research is the best for beginners as it saves you some effort when trying to understand the markets. Expert traders also benefit.
Pros and Cons of Using a Forex Broker for High Leverage
How to Choose the Best Forex Broker for High Leverage?
Leverage is an important factor to consider while choosing a forex broker but it’s not a standalone constituent for selecting a forex broker.
Apart from the leverage, it is important to look for a highly regulated broker, bearing in mind that local regulations may mean that you’re not allowed very high leverage. Some brokers may lure you into trading 1:2000 or 1:3000 leverage accounts, but those brokers may not be regulated.
Seek guidance from existing users of the brokers. Read reviews and ratings, noting that negative reviews show a lack of reliability. Always look for a broker that is trusted by other traders.
Other features to look out for are a user-friendly dashboard, a popular trading platform, and responsive customer support.
Looking for the best broker yourself can be a big headache, which is why we constructed a comparison table to help your quest.
How to Safely Use a Broker to Make Money Online Trading?“ There is certainly a high risk in forex trading and you should always be looking to secure your long-term survival as a trader. Forex trading is not a get-rich-quick scheme, so be careful not to fall prey to a lack of risk management. The secret to making money in trading lies in proper risk management. It is not wise to leave your positions unprotected. Always place a stop-loss for each position, and the risk for each position should not be greater than 1%. ”- Mircea Vasiu
We have discussed what leverage is and how it can be useful for your trading. We have also discussed the disadvantages of high leverage. This was to guide you in choosing the best forex broker for high leverage.
Frequently Asked Questions
You can check if the broker is regulated by searching the particular regulator’s online register. Also, look for reviews posted by traders on TrustPilot and other forex review websites.
Spreads (the difference between the buying and selling prices of assets) and commissions (fixed fees for trading) vary between brokers.
Most online broker accounts can be opened within minutes by filling in an online form, but you’ll also have to deposit some money and — in most cases — prove your identity.
There's a probability of making more profit with a high leveraged account, but the risk of loss also increases.
It depends on the broker, but many forex brokers allow you to trade other markets such as stocks (equities) and commodities. The amount of leverage will be different for different assets and asset types.
Many brokers allow you to trade via the popular MetaTrader 4 (MT4) and Metatrader 5 (MT5) products, but most brokers also offer their own proprietary web and mobile trading platforms.