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Forex Leverage Accounts

Featured Broker: FOREX.com

FOREX.com is the largest forex broker for US traders. You will get competitive pricing, award-winning customer service, actionable data, and powerful trading platforms to help you make the best possible trades.

Forex trading is one of the best ways to invest in the financial markets. Due to high accessibility over the past 15 years, it has gained extreme popularity. Forex is an abbreviation for foreign exchange and refers to an exchange of currency. In other words, you exchange currencies in an attempt to profit from the price difference. Traders use different brokerage agencies to do currency trading and some even trade small amounts like $1,000.

If you’re interested in using leverage in forex accounts so you can benefit from bigger profit potentials, we’ve rounded up the best brokers to help you do that.

What is Leverage in Forex?

Leverage in forex refers to a credit borrow from your broker simply so you have more buying power.

Since traders hold trades for a shorter period of time, they expose their capital to small percentage changes and can’t make much profit with only their own funds. This is why they use leverage to generate bigger earnings from the same percentage changes. Once you have more buying power, you can boost your gains. Traders actually aim higher with smaller amounts of money when they use leverage.

How Do Leverage and Margin Accounts Work?

Leverage

In theory, leverage is simple. For example, you might get 50:1 leverage which means you’ll generate a profit that’s 50 times larger without leverage.

However — and this is a big — don’t forget that if you aim for a profit that’s 50 times larger, it also exposes you to 50 times more risk. In other words, you can profit more, but you can also lose more compared to trading without leverage.

Margin

Margin means absolutely the same thing but it’s expressed differently. Margin is the amount of money you borrow from your broker. If you use 5:1 leverage, for example, you pay 1 unit and the other 4 units come from your broker. These 4 are the margin.

You can express margin by percentage. In other words, 20% of the trade size involves your own funds and the other 80% is margin. If you invest $5,000 of your own funds in the trade, you will have a buying power of $5,000 x 5 = $25,000. $5,000 are your own funds and the margin equals the rest: $20,000, or 80% of the whole trade.

Margin Account

A margin account is an account which lets you trade on margin — with leverage. Nearly all brokers will let you trade currency on margin. However, you’ll need to pay interest on the borrowed funds.

The longer you hold the borrowed funds, the higher your margin cost will be. If you’re a day trader, your margin cost may not amount to much, but if you’re a swing trader or position trader and hold the trades longer, your margin cost can go up to 10% or more. Carefully consider this, as it might cost you a big part of your profit and extend your loss if you have a losing trade.

Risk Assessment

It’s possible to limit your risk so you don’t completely eat up your account funds. No matter the leverage you utilize, you should never risk more than 2% of your bank in a single trade. Two percent risk per trade requires 50 consecutive losing trades for a full bankruptcy and this is not likely to happen; that’s like flipping 50 tails in a row with a coin.

Stop-Loss Order

The stop-loss order is a tool that is available to virtually all forex brokers. You choose an actual level on the chart and when the price reaches that level, it triggers a stop-loss order, which closes your trade no matter what. When you do this, you essentially tell the trading platform, “In case my trade is losing, I want to lose no more than this specified amount.”

Calculate Your Stop-Loss Levels

Let’s say you use the leverage of 50:1 with a $10,000 account. In this case, your total buying power is equal to $10,000 x 50 = $50,000. If you invest 25% of your buying power in each trade, this equals $125,000.

If you want to risk no more than 2% of your account in a trade, this equals $10,000 x 0.02 = $200 per trade. Now, calculate the percentage of $200 from $125,000, which you invest in each trade: $200 / $125,000, which equals 0.0016, or 0.16%. This means your stop-loss order should stay at a 0.16% distance from your entry point.

If you assume that the EUR/USD will increase, pretend you buy it at 1.1450. If you want to meet the above rules, then you should put your stop-loss order 0.16% below your entry point.

Here is the formula to do this:

  • Stop-loss level in a buy trade = 1.1450 – (0.16 / 100) x 1.1450 = 1.1432
  • Stop-loss level in a sell trade = 1.1450 + (0.16 / 100) x 1.1450 = 1.1468

In other words, your stop-loss order should be at an 18 pips’ distance.

Where Can You Find High Leverage Forex Accounts?

High leverage accounts are available with various trading brokers. You can even find leverage accounts as high as 1,500:1, which is not a healthy way to trade, as your stop-loss order should be extremely tight in order to stick to the 2% rule, maybe less than 1 pip.

Your broker will probably not let you have such a tight stop-loss order, and even if it does, the price fluctuation of the most volatile forex pairs will probably trigger the stop every time. If you don’t put in a stop-loss order, you can wipe out your account in minutes.

A healthy amount of leverage is 50:1. This is actually the maximum leverage a credible U.S. broker will give you due to regulations. In Europe, the regulatory requirements allow you a maximum leverage of 30:1. If you’re using higher leverage, you take on higher risk, which should always be done with caution. Here are some high leverage accounts and their providers based on location.

FOREX.com

Commissions

Spreads start as low as 1 But vary based on trading volume

Best For
  • Traders of all skill levels
  • If you need a great mobile experience
  • Those who like easy-to-consume data and research

FOREX.com consistently ranks as one of Benzinga’s top forex brokers – and the broker offers a pretty great margin account, too. Here’s what you can expect if you open an account with FOREX.com:

Maximum leverage:

  • 50:1 for major forex pairs

You can choose between two charging plans:

Based on commission: Low spreads plus a flat $5 commission per standard lot

Based on spread: Can go as low as 1 pip for EUR/USD.

Read Benzinga’s full FOREX.com Review

 

 

 

 

TD Ameritrade

Commissions

$6.95

Best For
  • Beginner investors
  • Advanced traders
  • Investors who want portfolio-building advice.

TD Ameritrade is one of the best forex brokers. TD Ameritrade gives you the maximum possible leverage for the country based on domestic regulation.

Maximum leverage:

  • 50:1 for major forex pairs
  • 20:1 for exotic forex pairs

You can choose between two charging plans:

Based on commission: $0.10 per 1,000 units with a minimum charge of $1 per trade.

Based on spread: Can go as low as 1 pip for EUR/USD.

TD Ameritrade offers more than 70 forex pairs to its clients. TD Ameritrade’s platform is Thinkorswim, an advanced trading solution which includes a rich set of trading tools and high-quality research sources like CNBC. TD Ameritrade also offers a mobile trading solution and a web browser platform which are both more basic.

Read Benzinga’s full TD Ameritrade Review

X-Trade Brokers (XTB)

X-Trade Brokers

Learn to trade Forex in X-Trade Broker's free online trading academy. Start trading in 1500 global markets today.

XTB is a suitable forex trading solution for people outside the U.S., as it doesn’t accept U.S. citizens. The broker originated from Poland but it is now based in the U.K., which is where it gets its regulation.

Maximum leverage: 30:1

Your forex trading fees with FXB will depend on the account type you choose:

Standard account: 

  • Minimum spread: 0.35 pips
  • No commission

Pro account:

  • Minimum spread: 0.28 pips 
  • Commission: from £2.50 per lot

You can trade more than 50 forex pairs with XTB. Its own trading platform is xStation 5. The platform runs on a web browser, desktop, mobile devices, and smartwatch. The platform includes high-quality research offerings like statistics, calculators, market analysis, audio feeds, and many others. XTB also supports MetaTrader 4, which is the most popular platform for retail forex trading.

AxiTrader (Australia)

AxiTrader

AxiTrader was founded on a simple idea: to be the broker anyone would want to trade with. Try a free demo account for 30-days with a virtual cash balance of $50,000

Maximum leverage: 400:1

The difference is obvious here compared to the brokers from the U.S. and Europe. You can choose between two account types with AxiTrader:

Standard account

  • Minimum spread: 1 pip
  • No commission

Pro account

  • Minimum spread: 0 pips
  • Commission: $7 round trip

AxiTrader keeps trading casual and offers the classic MetaTrader 4 platform to its clients.

Final Thoughts

Leverage and margin trading are two mutually connected terms, as they both allow you to leverage your buying power. The financial regulators around the world tighten the trading activity more and more to protect clients from uninformed actions with maximum leverage requirements (50:1 in the United States and 30:1 In Europe).

If you’re looking for the highest leverage possible, search for brokers outside Europe and the U.S. Since Europe also limits leverage, a lot of traders migrated their trading accounts to brokers from Australia, where the max is 400:1 there.

Compare Online Brokers
Broker Commission Account Min Get Started

Spreads start as low as $1 But vary based on trading volume $250 Learn More

$6.95 for fewer than 30 trades/quarter. $0 Learn More

$0.005 per share $0 Learn More

$4.95 volume discount available $0 Learn More

$5 volume discount available $5,000 Learn More