Best Forex Leverage for Small Account
Want to jump straight to the answer? The best forex broker for most people is definitely FOREX.com or CedarFX.
Currency traders have a few advantages over traders of other types of securities. The market stays open 24 hours a day during the work week and the best forex broker commissions are often a fraction of what online stock brokers charge. But the biggest edge is margin requirements and leverage. You don't need a big infusion of capital to begin a career as a forex trader, just the right tools and the right broker.
Contents
- What's Leverage and Margin in Forex Trading?
- United States Limitations
- What to Look for in a High Leverage Forex Broker
- The Best High Leverage Forex Brokers
- 1. Best Overall: FOREX.com
- 2. Best for $0 Commissions: CedarFX
- 3. Best for Non-US Residents: AvaTrade
- 4. Best Forex Execution: IG
- 5. Best for Non-US Residents: Pepperstone
- 1. Best Overall: FOREX.com
- Get the Best High Leverage Forex Broker
- Frequently Asked Questions
What's Leverage and Margin in Forex Trading?
Traditional stock brokers in the United States often offer margin trading to their clients. The broker will lend money to the client for additional stock purchases and then make money in interest when the loan is repaid. Margin rates vary, but most online brokers charge clients between 5% and 9% to borrow money, depending on the amount. Why would clients want to borrow money for the stock market from their brokers?
They want to crank up the leverage on trades.
Leverage refers to how much borrowed money is involved in a trade. In most stock brokerages, investors can get 2:1 leverage, which means they need $50 in their account to trade $100 in capital. Obviously, leverage adds risk to any trade. Since you don't just lose your capital if it goes bad, you owe your broker money.
Excessive leverage has killed many financial firms, including Lehman Brothers and Long Term Capital Management. But when it's used properly, you can generate tremendous profits with little upfront capital.
In forex trading, leverage can often be as high as 500:1. Since currencies move incrementally compared to stocks, using leverage doesn't carry the same risks. When trades are measured in fractions of a penny, 500:1 leverage doesn't seem excessive. Forex brokers use margin requirements to determine how much leverage currency traders can use per trade. This is expressed as a percentage, such as USD/EUR trades that require a 2% margin.
United States Limitations
Forex trading is subject to stricter regulations in the United States than most countries in the world. Europe and Australia have no aversion to leverage as high as 500:1, but U.S. law limits forex brokers to 50:1 leverage.
Additionally, many forex brokers offer contracts for difference (CFDs) on indices, bonds, commodities and even cryptocurrencies. These products are highly speculative and banned entirely in the U.S., which means MetaTrader 5 has practically no uptake.
What to Look for in a High Leverage Forex Broker
Choosing a forex broker depends not only on your trading preferences but also the country you live in. United States forex traders won't be able to use the highest available leverage or use popular trading programs like MetaTrader 5. When you pick a broker, here are a few things to pay attention to:
- Margin requirements: In the United States, margin requirements are limited to 2% (50:1 leverage). Internationally, you can lever trades up to 500:1 on most major currencies. You don't need to use high leverage on all trades, but make sure to pick a broker with limits that work for you.
- Commissions and fees: Forex brokers make money in two ways: from commissions or from the spread. Many brokers have spread-only and commission accounts available, and commission accounts get reduced spreads. Brokers have fee charts on their websites. Make sure you understand all charges before you open an account.
- Support for trading software: Many forex brokers have their own proprietary trading software, but also offer popular platforms like MetaTrader 4 and cTrader. If you like to trade using MetaTrader 4, make sure the broker you choose supports it!
- Account and trade minimums: Capital required to open an account varies by the broker, as does the amount needed to complete a trade. Some brokers may have no account minimum, but all will have trade minimums.
The Best High Leverage Forex Brokers
Using the above criteria, Benzinga has identified the best high leverage forex brokers on the market today. High leverage in the United States is limited to 50:1, but for international brokers to qualify, they must offer 500:1 leverage for at least a few major pairs.
Minimum Trade Size
1,000 (0.01)
Commisions
$5 per 100K traded
1. Best Overall: FOREX.com
Forex traders in the United States are at a disadvantage. Leverage is limited to 50:1 and products like CFDs are completely illegal. With those caveats out of the way, American currency traders still have good options available to them and Forex.com is one of the best.
FOREX.com has over 70 forex pairs to choose from and you'll get 2% margin (50:1 leverage) on major pairs EUR/USD, USD/CAD, and EUR/CAD. Most other major pairs rest between 3% and 5% margin. Forex.com offers three different account types: standard, commission and direct market access (DMA). The standard account is spread only, while the commission account lowers spreads but institutes a $5 commission on every 100,000 units.
FOREXX.com supports MetaTrader 4 and NinjaTrader and has its own proprietary trading system available on
Read Benzinga's full FOREX.com Review
Disclosure CedarFX is not regulated by any major financial agency. The brokerage is owned by Cedar LLC and based in St. Vincent and the Grenadines.
2. Best for $0 Commissions: CedarFX
CedarFX bills itself as the original eco-friendly brokerage, offering both the Commission Account and the Eco Account. You can trade a range of financial tools through CedarFX, including foreign currencies.
While CedarFX matches $1 commissions on Eco Accounts, planting over 100,000 trees to offset its carbon footprint with help from Ecologi, it also offers high-leverage trading.
You can use free demo accounts to learn how your trading style works on the current market, and you have access up to 500:1 leverage for forex trading. For the sake of diversifying your portfolio, you also have access to 500:1 leverage for precious metals, 200:1 for indices and commodities, 100:1 for cryptocurrency and 20:1 for stocks.
Leveraging at a high rate with CedarFX allows you to speculate as much as you like, buy for growth, short certain currencies and grow your net worth quickly.
Spread
as little as 0.6 pips
3. Best for Non-US Residents: AvaTrade
AvaTrade carries 7 regulations across 6 continents (Europe, Australia, Japan, British Virgin Islands, UAE
AvaTrade caters to its customers, offering a 24-hour multilingual support desk for a broad range of instruments, platforms
- Forex
- Stocks
- Commodities
- Cryptocurrencies
- Indices
AvaTrade offers desktop, tablet, mobile and web-based trading with MetaTrader 4, MetaTrader 5, its proprietary WebTrader, AvaOptions
4. Best Forex Execution: IG
At 500:1 leverage, IG is another broker that allows you to speculate on currencies across the globe. IG offers high leverage, which you need to increase your gains quickly, but the platform makes the process as simple and profitable for investors as possible by:
- 80 currency pairs to choose from
- Very tight spreads starting at 0.8 pips
- Massive liquidity
- Open 24 hours a day, 5 days a week
Take advantage of the platform's simplicity and leverage options to diversify your portfolio without investing all your cash at one time.
Account Minimum
AUD$200 or equivalent
5. Best for Non-US Residents: Pepperstone
Melbourne, Australia-based Pepperstone aims to provide traders around the world with superior technology, low-cost spreads
Pepperstone offers 500:1 leverage for forex in ASIC, 50:1 in its DFSA jurisdiction and 30:1 in its FCA jurisdiction. This means for every $1 that you have in your trading account, you can trade $500 under ASIC, $50 under DFSA and $30 under FCA in the forex market.
Access Pepperstone's platforms, available on Windows and Mac OS for desktop, iOS and Android for mobile and tablets and on its web app, WebTrader. You can also use MetaTrader 4 and MetaTrader 5 or cTrader. You can also tap into a few social trading platforms — Myfxbook, Mirror Trader and RoboX.
Get the Best High Leverage Forex Broker
Forex traders enjoy leverage that makes equity and bond traders weak at the knees. Leverage of 500:1 isn't uncommon for most forex brokers, but U.S. clients can only get 50:1. Leverage shouldn't be the only factor when deciding on a forex broker, however.
Consider the trading platforms and currency pairs available, the costs and fees associated with trading and the capital needed to open an account.
Frequently Asked Questions
What happens if I over-leverage?
1
What happens if I over-leverage?
asked
Dan Schmidt
1
Over-leveraging is going beyond the approved margin equity by creating a negative balance in your account.
Answer Link
answered
Benzinga
Are using high amounts of leverage good with Forex?
1
Are using high amounts of leverage good with Forex?
asked
Dan Schmidt
1
Leverage increases your buying power and allows you to take advantage of smaller moves. The downside is if the position goes against you, it creates margin calls.
Answer Link
answered
Benzinga
Explore More: BEST ASIC-REGULATED FOREX BROKERS
FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets plus spot metals with low pricing and fast, quality execution on every trade.
Best Forex Leverage for Small Account
Source: https://www.benzinga.com/money/high-leverage-forex-brokers/
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