When asked about the reasons to trade Forex, most people say they do it to make good money and achieve financial independence. The foreign currency market provides endless opportunities through price action to realize this particular aspiration if one has the skills and knows how to seize said opportunities when they present themselves. At the same time, Forex brokers and their trading platforms provide many useful tools to get the most out of market movements.
In the following article, we are going to delve into the topic of leverage and the best high-leverage Forex brokers in the industry, rated by forex-ratings.com. Leverage is undoubtedly the most effective tool for amplifying potential profits; in other words, extracting the most out of the opportunity at hand. It is practically the only way to grow a small Forex account fast. However, as many in this industry like to say, leverage is a double-edged sword because, when done wrongly, trading with leverage may have disastrous consequences for the capital invested in a Forex broker account.
Also, we suggest being very picky about the broker that provides the leverage tool. Forex-ratings.com compiled the list of the top 5 Forex brokers with high leverage that meet the criteria of trusted brokerage services. After reading this piece, you will have gained a basic insight into leverage-based Forex trading and receive recommendations on choosing the brokers with the "sharpest" leverage tools.
Understanding the importance of leverage in Forex trading
The definition
Most newcomers enter the game with a fairly small capital, for whichever reason. At the same time, nearly all dream of doubling and tripling the starting account through one of several big winning trades. Such ambitions are totally normal, but unless you get lucky in a massive pump-and-dump in crypto, growing a small Forex account fast without using leverage is next to impossible. If you are prepared to grind and see incremental gains while avoiding the risks associated with leverage, by all means, stick to spot trading. But leverage is for those who are prepared to take bigger risks and reap bigger rewards or face bigger consequences.
In trading, leverage is defined as the practice of borrowing money from a broker when you want to increase your position in the Forex market. Basically, a trader gets to control (vastly) more money than he or she has in the trading account. The size of that account must meet the initial margin requirements, which is another name for the collateral in the form of cash, securities, etc., which an account holder must have to open a corresponding account at the brokerage firm.
There is also a maintenance margin, which is defined as the amount of capital needed to sustain the existing account. Usually, the maintenance margin amounts to 25% of the total value of securities that a trader currently owns.
Forex leverage ratios explained
Forex brokers typically present leverage options to traders, which are expressed as different ratios such as 50:1, 100:1, 500:1, and so on. For new traders, these ratios can be confusing, but they are actually known as "leverage ratios." These ratios indicate the amount of capital that a trader can borrow from a broker when they meet the margin requirements.
In this case, the "1" represents the initial margin, while the other number represents the leverage a trader can use to amplify potential profits. For instance, if the initial margin requirement is $1,000 for the USD/EUR Forex market with a broker that offers 200:1 leverage, the deposit of $1,000 would grant access to $200,000 in borrowed funds to open a substantial trading position. To put it simply, for every dollar of their own capital, a trader can control a position that is 50 to 500 times larger, which can result in correspondingly large profits or losses.
How leverage can magnify profits and losses
It should be clear now that high leverage in Forex can magnify profits or losses by allowing the market participants to control larger trading positions than their own can afford. Let's expand on the 100:1 leverage example where a trader with $1,000 in the bag controls a whole $100K. If the trade that he or she undertakes turns out profitable, the trader earns a return on the entire $100,000 position. In that case, even a small percentage increase in the value of the traded currency pair can result in a profit that is 100 times larger than that made with own capital. Making $3,000 instead of $30 on an insignificant move sounds tempting.
However, as you understand, leverage also magnifies losses. If the trade moves against the trader as the result of a bad decision or sudden shift in the market, the losses will be magnified proportionally to the size of the leveraged position. In the example above, if the trade loses 1%, the trader will lose $1,000, which is the full value of their account.
That is why growing a small Forex account quickly using high leverage is a "do or die" approach. If you don't act with surgical accuracy with a solid trading and risk management strategy in place, you are basically gambling like there's no tomorrow.
Other risks associated with high-leverage Forex trading
A reader should have understood by now that trading foreign currencies with high leverage is a very risky business where you may stake your entire account on one trade. Losing capital is the main risk, but we would like to highlight a few other ones that will help you understand the matter better:
- Margin Calls: As already mentioned, when using high leverage, you essentially borrow the broker's money to trade. If your trades don't pan out, your account balance will begin to shrink very rapidly. And if it drops below a certain level, your broker will do an unpleasant thing called a margin call. A margin call requires you to deposit more money into your account to cover your losses or close your trades. Using the previous example, you might need to deposit another $1,000 of your own money to cover the $2,000 loss on a bad trade with 100:1 leverage if the market goes just 2% against you. If you don't have enough money, your trades may be closed automatically, resulting in further losses.
- Volatility: Forex markets can be very volatile, with prices moving quickly and unpredictably in either direction. During volatile market conditions, the price may drop by that notorious 2% only to reverse and begin going in the "right" direction, which is one of the most frustrating feelings a Forex trader may experience. High leverage can magnify the impact of price movements on your account, making it easier to lose money quickly in the "rollercoaster" market conditions.
- Overtrading: High leverage can give traders a false sense of security, leading to overtrading. Overtrading can lead to impulsive and emotional decisions, which can result in losses.
- Lack of experience: Trading with high leverage requires a lot of experience and skill. If you aren't consistently making winning trades and have a positive P&L doing basic spot trading, try to stay away from leverage.
- Counterparty risk: When you trade with high leverage, you are essentially taking a loan from your broker. If your broker goes bankrupt or becomes insolvent, you may lose all of your trading capital permanently, especially if a trusted financial authority doesn't regulate the broker.
Criteria for choosing Forex brokers with high leverage
Regulation, regulation, regulation
We at forex-ratings.com will always emphasize the importance of regulatory compliance when choosing the best Forex broker for whichever need, including trading with high leverage. There is a plethora of brokerage firms that offer really attractive leverage options, some of which even exceed a 1000:1 ratio. Always consider the trustworthiness of the chosen broker before allowing yourselves to get lured by the prospects of massive profits.
One way to measure the broker's trustworthiness is to check its regulatory profile. That way, you will understand whether this business entity is willing to bear responsibility for its actions, adhere to obligations to authorities and customers, and resolve legal and financial issues if such arise. There's big money at stake when trading with high leverage, so you have to make sure that you aren't dealing with Forex scammers. One way of doing that is by giving absolute preference to brokers that hold a license from a reputable regulator or regulators if the broker is multi-regulated.
A regulated Forex broker has to follow a set of strict rules that ensure their operations are transparent and fair. This type of broker is also financially stable and has enough capital to protect your investment. On the other hand, if you go with an unregulated broker, you're playing with fire. These brokers could engage in shady practices, such as manipulating the market or not segregating your funds from their own. Needless to say, this could result in a massive investment loss. The list of top regulatory bodies includes the following:
- Financial Conduct Authority (FCA) of the United Kingdom;
- Cyprus Securities and Exchange Commission (CySEC);
- Australian Securities and Investments Commission (ASIC).
All Forex brokers that deserve the recommendation of forex-ratings.com are licensed and controlled by one of these authorities, except for one regulated by the Financial Services Commission (FSC) of Belize, which makes it an offshore broker.
The quality of trading software isn't to be ignored
Apart from the broker's reliability, the speed of trade execution is another issue that worries people who trade foreign currencies with high leverage. With big trading positions, even a slight execution lag could significantly affect profits, especially in volatile markets. That is why choosing a broker offering top-of-the-line trading software is paramount. It could be MetaTrader 4 (MT4) or MetaTrader 5 (MT5), or the broker's proprietary platform.
Make sure that it falls under the following criteria:
- High execution speed and low latency are a must when choosing a trading platform. Opt for software that executes orders in 100 milliseconds or less; it should be stated in the software description. If not, contact the broker's customer support. One-second execution is the slowest you can afford. Otherwise, your leveraged position may suffer significant losses from sudden price slippages.
- A good trading platform has to have a comprehensive range of trading tools and indicators. Essential tools such as advanced charting, technical analysis indicators, and news feeds are crucial for traders to analyze the markets and pinpoint profitable trading opportunities. Also, they should offer adequate risk management tools such as stop-loss orders and take-profit orders. These instruments can help traders limit their losses and lock in profits on time, which is crucial when trading with high leverage.
- Lastly, the software tailored for trading with high leverage must be easy to navigate and provide a good user experience in general. An overly complicated interface could force an error that may cost a lot of money for an unsophisticated trader. Look for a platform with minimal downtime, ensuring that traders can access the markets and execute trades without interruption.
Pick the Forex account that suits your trading needs
The account type is the last point that we'd like to highlight in this section. It is crucial to have an account that suits your trading strategy, risk tolerance, and financial capabilities regarding the initial (margin) deposit. The leverage ratio is, of course, the most important factor when deciding about the account, but other factors must be considered. As for the ratio, it should directly correlate with your risk tolerance. If you are only testing the waters without being fully confident of your trading abilities, you better opt for an account with a lower leverage ratio, not higher than 100:1. Only seasoned Forex traders with working strategies, perfected risk management, and high tolerance to risk should consider higher leverage options.
A minimum deposit is also a factor to be considered when selecting a high-leverage broker. Some brokers may establish an entry threshold as low as $5, but you obviously won't get any good leverage with that kind of money. Aim for a $1,000 deposit if you consider borrowing substantial capital to grow the account. However, our selection includes top Forex brokers with various deposit requirements, though they are within the said $1,000 for the basic leveraged account.
Last but not least, the spreads and commissions which differ from account to account. Higher-end accounts may offer tighter spreads and lower commissions, but they may not be suitable for all traders. For example, if you are a low-frequency trader, choose an account type that offers higher spreads and commissions but lower minimum deposit requirements. Also, understanding your broker's spreads and commissions is critical for adequate risk management. If your broker's fees are too high, you may need to take on more risk to make a profit, which can increase your risk of losses.
On the other hand, if your broker's fees are too low, you may be tempted to take on too much risk, which can also increase your risk of losses. In any case, try to pick an account with the lowest possible spread - the difference between the bid and the ask price. Low or zero-spread accounts allow traders to extract a maximum profit even from small market moves. All Forex brokers listed here have tight spreads and charge low commissions.
Our pick of top 5 Forex brokers with high leverage
RoboForex
RoboForex is the CySEC-regulated Forex broker that tops our list with a leverage ratio of 2000:1, the highest among the industry's best brokerage firms. It offers traders the ability to buy and sell various assets, including stocks, indices, Forex, commodities, ETFs, CFDs, and cryptocurrencies, with lightning-fast order execution on one of the quickest trading platforms available. RoboForex's other points of attraction include super competitive spreads that start from 0 pips, negative balance protection, and the choice of over 12,000 trading instruments across eight asset classes, including foreign currencies. In addition, traders can take advantage of various bonus and promotional programs, including a 15% cashback offer.
RoboForex has two base currencies (USD and EUR) and three account types: MetaTrader 4, MetaTrader 5, and StocksTrader, with the first two being best suited for Forex trading. The beginners may want to consider a broker's Demo ECN, Demo Pro, or ProCent account, where the minimum deposit is only $10. MT4 and MT5 platforms boast one of the fastest trade executions among brokers of the same caliber. Newly registered Pro and ProCent accounts are given access to the said 2000:1 leverage through the Members Area. They offer a $10 minimum deposit with floating spreads from 1.3 pips. However, the leverage value of other accounts is automatically decreased to 1000:1.
Pros:
- Trusted broker;
- Top execution speed;
- High leverage options;
- Wide choice of trading instruments.
Cons:
- Somewhat poor choice of cryptocurrency markets.
HF Markets
HF Markets is a top multi-asset Forex broker, a new brand name of HotForex that was well-known in the trading community. It is also known under the name HFM, with both brands belonging to the HF Markets Group. Established in 2010, the brokerage firm has its headquarters located in Cyprus and holds a license from the CySEC as well as other reputable regulators, such as the UK's Financial Conduct Authority (FCA), the Dubai Financial Services Authority (DFSA), and Financial Services Authority (FSA) of Seychelles among others.
HF Markets offers a variety of live account options, including Micro, Premium, HFCOPY, Islamic, Zero spread, Cent, and PAMM accounts. The maximum leverage is up to 1:1000, and the minimum deposit starts at $5. Each account type has unique features, including scalping/hedging capabilities, expert advisors, trailing stop, pending orders, one-click trading, and mobile trading. However, swap rates are charged for holding overnight positions. The minimum lot size and deposit requirements vary by account type. The Zero spread account requires a minimum deposit of $200 to access varying spreads.
Pros:
- Multi-regulated broker;
- Offers a very broad range of trading instruments, all of which can be traded with the 1000:1 leverage;
- Very low initial deposit;
- Low trading fees;
- Holder of many industry awards.
Cons:
- Comparably slow withdrawals with limited withdrawal options;
- Customer support can be slow at times.
XM
XM is a globally renowned Forex broker that operates under strict regulation of Belize's Financial Services Commission (FSC), allowing clients to trade more than 100 instruments. These include stocks, indices, futures, options, and Forex pairs to cater to different investment strategies. With a user-friendly interface, XM's platform is accessible to both beginners and seasoned traders alike. The multi-asset platform allows clients to trade all available instruments from a single account. XM has established itself as a fair and dependable trading platform by pioneering a no re-quotes and no rejections policy. Over 99% of all trading orders are executed in under a second without any rejections or delays. This enhances the trading experience and instills confidence in the platform's reliability and efficiency. All clients of XM receive the added benefit of Negative Balance Protection, which ensures that their losses are limited to their account balance and never exceed it. This feature provides peace of mind to traders and safeguards them against incurring any significant financial losses.
The account opening process, deposit and withdrawal methods, and trading procedures are all designed to be simple and intuitive for every customer. The minimum deposit with XM is only $5 for all accounts except the Shares one. The spread ranges from 0.6 pips to 1 pip. The offered leverage ratio is 1000:1, though the total equity depends on margin requirements.
Pros:
- A reputable multi-regulated broker;
- The minimum deposit is extremely low;
- Fast trade execution.
Cons:
- Access to trading instruments may be limited for certain countries.
FXTM
FXTM, also known as Forex Time, has gained a reputation as one of the world's leading Forex and CFD brokers due to its extensive client base and high-quality offerings. The pillars on which the company has built its foundation are excellent trading conditions, comprehensive education programs, good trading fees, and high leverage options, making it accessible to traders of all levels worldwide.
FXTM is a relatively new broker, established in 2011. Its headquarters are located in Limassol, Cyprus, with additional offices throughout Europe, the UK, and South Africa. The firm's rapid growth can be attributed to its strong focus on Africa and Asia and its authorization by respected regulators, including CySEC, FCA, and Mauritius's Financial Services Commission (FSC).
It is a global Forex and CFD broker offering over 1000 instruments, including currencies, stocks, indices, commodities, and more. The platform boasts ultra-low spreads and lightning-fast execution speeds, making it an ideal choice for traders worldwide. FXTM serves clients from over 150 countries and maintains a global network of offices throughout Europe, Africa, and Asia. The minimum deposit is $10 for the Micro Account that offers the 1000:1 leverage. Higher-grade accounts: Advantage and Advantage Plus, have a $500 deposit limit, but they also bump up the leverage to 2000:1.
Pros:
- Highly trusted multi-regulated broker;
- Good leverage options;
- Negative balance protection.
Cons:
- Account security options may vary depending on the jurisdiction.
FxPro
Despite being the last on our list, FxPro is probably the most reliable Forex broker of the bunch since it has an almost perfect counterparty rating, which indicates that the company behind the broker has a minimal risk of default or bankruptcy. On top of that, FxPro is a member of the Financial Services Compensation Scheme (FSCS), offering an added protection layer for traders. In the unlikely event that FxPro becomes insolvent, clients are entitled to claim compensation through the scheme, further underlining the platform's dedication to ensuring the safety and security of its clients' funds. However, beginners may find FxPro and its products a bit too complicated, so this broker is more suitable for experienced traders.
With FxPro, traders have access to CFDs on six different asset classes, including Forex, shares, indices, futures, metals, and energy. The parent company, FXPro Financial Services Limited, has been regulated by the Cyprus Securities and Exchange Commission (CySEC) since 2007 and by the Financial Sector Conduct Authority (FSCA) since 2015. The broker establishes the maximum leverage at 500:1 for Forex majors and minors; it also offers a dynamic leverage model which adjusts the leverage ratio depending on the number of traded lots.
Pros:
- Highly reliable and secure;
- Good variety of trading instruments.
- Interesting leverage model.
Cons:
- Not beginner-friendly.
Final thoughts
Forex trading using high leverage is one of the fascinating topics because the instrument itself can make or break a trader. We would like to reiterate that you should test your skills with leverage only if you have a consistent winning rate that is based on a sound strategy. And even then, the risk of being burnt remains very high, especially in highly volatile markets. Therefore, the first conclusion is that if you aren't ready, better don't risk it unless you hate the money and want to see it evaporate in one price move.
However, if you are prepared to do more gambling than thoughtful and patient trading, then high leverage could be the only way to beef up a small account in a relatively short period of time, but with the risk of losing it all in an even shorter time. All in all, high leverage must be approached with great caution, but if you master this instrument, your financial freedom is practically guaranteed.
