High Leverage Brokers: What They Are and How to Choose the Best

If you are a trader with many years of experience, you will already know that in 2018 ESMA (the European Securities and Markets Authority) imposed limits on the use of high leverage for opening CFD positions. In particular, from that moment on, retail investors were allowed to trade with a maximum leverage of 30:1 (Forex).

But for some asset classes, the permitted leverage is even lower: for example, for stocks the maximum leverage is 5:1 and for cryptocurrencies the maximum leverage allowed is 2:1.

In this guide, we will look at how the European regulatory framework has changed in this area and which are currently the best high leverage brokers offering the most favorable conditions.

European and UK online brokers were required to implement these restrictive measures, aimed at protecting less experienced users who trade complex and risky products such as CFDs.

On the other hand, it should be recognised that experienced traders are aware of both the risks and the benefits associated with high leverage trading. Some of these traders have therefore sought out non-European platforms that do not impose limits on the use of leverage.

In financial jargon, online brokers that continue to offer high leverage have been referred to as no ESMA brokers.

In this guide, we will explain what high leverage trading involves and which brokers currently offer the best conditions with leverage of up to 1:500.

Before explaining what leverage is and how it works, let us take a step back to briefly define what CFDs are, the financial instruments to which leverage is applied in trading.

CFDs (Contracts for Difference) are complex financial instruments that allow traders to speculate on the rise or fall of the price of an underlying asset. Instead of physically trading the underlying asset, the two parties entering into the contract (the trader on one side and the broker on the other) agree to exchange money based on the change in value of the underlying asset.

With the leverage effect, the broker allows the trader to open a CFD position by using only a fraction of the contract’s notional value. For example, with 500x leverage it would be possible to open a CFD position with a notional value of €50,000 while having only €100 in the account (i.e. €50,000 / 500). What does trading with 500:1 leverage mean? It means opening a position by committing just one five-hundredth (or 2%) of the contract’s notional value.
If instead we used a broker offering 400x leverage, to open a CFD with a notional value of €50,000 we would need €125 as margin in the account.

So, when is leverage used in trading? Leverage in trading is mainly used to meet the needs of undercapitalised traders who otherwise would not be able to operate. By using leverage, investors can gain greater exposure compared to their invested capital (up to 500x), thus having the possibility to amplify both the profits and the losses resulting from trading activities.