Leverage Trading

Leverage trading is a common strategy among UK investors, though it may seem like an alien concept for beginners. So how does it work? This guide explains the basics, including what a leverage ratio is, what zero or non-leverage trading is and whether you can be taxed for it. Use our tutorial to get started with leverage trading, from the best brokers to FCA regulations.

Leverage Trading Brokers

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Found 23 Brokers
A trader with a Plus500 account can trade CFDs on underlying financial instruments such as Forex, Stocks, Commodities, Cryptocurrency (Availability subject to regulation), Options and Indices. With tight spreads and no commission, they are a leading global brand. Voted #1 in UK.
Demo Account
Yes
Regulated By
FCA, CySec, ASIC
MT4 Integration
No
Min. Deposit
$100
Min. Trade
Varies by asset
Crypto
No
Pepperstone offers spread betting andCFD trading to both retail and professional traders. Clients can trade FX, indices, commodities and shares on MT4, MT5 and cTrader platforms.
Demo Account
Yes
Regulated By
FCA, ASIC, SCB, DFSA, CMA, BaFin
MT4 Integration
Yes
Min. Deposit
£200 / $200
Min. Trade
0.01 Lots
Crypto
No
FXCM are an FCA regulated, London based broker. Companies under the FXCM umbrella are also regulated in Australia and South Africa.
Demo Account
Yes
Regulated By
FCA, CySEC, ASIC.
MT4 Integration
Yes
Min. Deposit
£300
Min. Trade
Varies by asset
Crypto
No
Leading forex and CFD broker regulated in Ireland, Australia, Canada and South Africa. Avatrade are particularly strong in integration, including MT4
Demo Account
Yes
Regulated By
CBoI, ASIC, FSB
MT4 Integration
Yes
Min. Deposit
$100
Min. Trade
$1
Crypto
No
Eightcap is a multi-regulated FX & CFD broker offering the MT4 & MT5 platforms. Award winning platform, zero commission, free education and low spreads.
Demo Account
Yes
Regulated By
ASIC, VFSC
MT4 Integration
Yes
Min. Deposit
£/€/$100
Min. Trade
0.01 lots
Crypto
Yes
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Demo Account
Yes
Regulated By
FCA
MT4 Integration
No
Min. Deposit
$200 ($50 in US)
Min. Trade
$1
Crypto
Yes
XTB is one of the largest stock exchange-listed FX & CFD brokers in the world, offering access to over 2000 instruments on their trading platforms.
Demo Account
Yes
Regulated By
FCA, CySEC, IFSC, KNF, DFSA
MT4 Integration
No
Min. Deposit
$0
Min. Trade
0.01 Lots
Crypto
No
Deriv.com are a new brokerage, offering options and CFDs on a simple, reliable, flexible platform. Get access to volatility indexes exclusively at Deriv.
Demo Account
Yes
Regulated By
Malta (MFSA), Labuan (LFSA), Vanuatu (VFSC), British Virgin Islands (BFSC)
MT4 Integration
No
Min. Deposit
€/£/$5
Min. Trade
0.01 Lots
Crypto
No
Skilling are an exciting new brand, regulated in Europe and beyond, with a bespoke browser based platform, allowing seamless low cost trading across devices.
Demo Account
Yes
Regulated By
CySec, FSA
MT4 Integration
Yes
Min. Deposit
100 £/€/$ or 1000 NOK, SEK
Min. Trade
0.01 Lots or 1 Share
Crypto
Yes
Capital.com offer CFDs and Forex on a huge range of assets, with competitive spreads and unique platforms, including the fully functional mobile app.
Demo Account
Yes
Regulated By
FCA, CySec
MT4 Integration
Yes
Min. Deposit
£/$/€20
Min. Trade
Varies by asset
Crypto
Yes
CMC Markets is headquartered in London and listed on the LSE (FCA Regulated). They offer competitive spreads on a global range of assets via a next generation platform.
Demo Account
Yes
Regulated By
FCA, ASIC, IIROC, MAS
MT4 Integration
Yes
Min. Deposit
£ 0
Min. Trade
0.01 Lots
Crypto
No
UniDex is a leading decentralised crypto exchange offering an extensive list of tokens.
Demo Account
No
Regulated By
MT4 Integration
No
Min. Deposit
$43
Min. Trade
$20
Crypto
Yes
Pionex is a cryptocurrency exchange with impressive automated trading tools and bots.
Demo Account
No
Regulated By
FinCEN
MT4 Integration
No
Min. Deposit
$0
Min. Trade
0.1 USDT
Crypto
Yes
OKEx is a digital exchange offering trading on hundreds of cryptos across desktop and mobile applications with low fees.
Demo Account
Yes
Regulated By
MT4 Integration
No
Min. Deposit
10 USDT
Min. Trade
Variable
Crypto
Yes
RoboMarkets is an award-winning broker offering flexible margin trading.
Demo Account
Yes
Regulated By
CySEC
MT4 Integration
Yes
Min. Deposit
$/£/€100
Min. Trade
0.01 lots
Crypto
No
Bybit is an established crypto exchange aimed at active online traders.
Demo Account
Yes
Regulated By
MT4 Integration
No
Min. Deposit
$0
Min. Trade
0.001
Crypto
Yes
Gate.io is a crypto exchange offering a variety of derivatives on a proprietary platform.
Demo Account
Yes
Regulated By
MT4 Integration
No
Min. Deposit
$0
Min. Trade
$10
Crypto
Yes
Naga is a social investing platform offering copy trading on major financial markets including cryptocurrencies and stocks.
Demo Account
Yes
Regulated By
CySEC, FCA
MT4 Integration
Yes
Min. Deposit
$250
Min. Trade
Variable
Crypto
Yes
AdroFX is a regulated, global broker offering forex, CFD and crypto trading with MT4 access and attractive welcome bonuses.
Demo Account
Yes
Regulated By
FSA, BSSLA
MT4 Integration
Yes
Min. Deposit
$25
Min. Trade
0.01 lot
Crypto
Yes
Optimus Futures is an introducing broker partnering with numerous FCM services. It offers hundred of global assets across 40+ trading platforms.
Demo Account
Yes
Regulated By
CFTC, NFA
MT4 Integration
Yes
Min. Deposit
$500
Min. Trade
Variable
Crypto
Yes
Tiger Brokers is a stock and securities broker based in China that offers equities from several global markets as well as an impressive proprietary trading platform.
Demo Account
Yes
Regulated By
SEC & FINRA, ASIC, MAS, SIPC, NFA, DTC, NSCC
MT4 Integration
No
Min. Deposit
$0
Min. Trade
1 lot
Crypto
No
BUX Zero is a mobile stock broker with a sleek app and helpful educational content.
Demo Account
No
Regulated By
AFM
MT4 Integration
No
Min. Deposit
$0
Min. Trade
$0
Crypto
No
IB Boast a huge market share of global trading. With a minimum deposit of $10,000 however, they remain an option for larger traders only.
Demo Account
Yes
Regulated By
SEC, FCA
MT4 Integration
No
Min. Deposit
$10000
Min. Trade
$100
Crypto
Yes

What Is Leverage Trading?

Leverage trading in the UK is a system by which a trader borrows capital from their broker to increase the size of a position they wish to open. This allows investors to access returns not usually possible with low capital. Leverage can be applied to both long (buy) and short (sell) positions. However, it is important to note that leverage trading can magnify losses just as it can increase profits.

Once the trader closes a position, the leveraged loan is returned to the broker and the trader keeps the profit. In the UK, leverage trading rates for retail clients is limited by the Financial Conduct Authority (FCA) to 1:30, which can also be written as x30. If you qualify for a professional trading account, brokers can offer leverage up to 1:500.Leverage Trading In UK Markets

You can use leverage trading with traditional brokers as well as decentralised finance (DeFi) exchanges. Most brokers offer a free margin trading calculator to help you calculate potential profits or losses. They may also offer specialised tools, like risk, crypto or liquidation price calculators.

If you are leverage trading spot stocks, you may get paid dividends. Your broker might keep these dividends until you close the position, but they can also be used to offset any debts.

Leverage Trading Example

Consider trading a CFD on gold using margin. If the price of gold is currently £1,000 per ounce and you expect the price to rise, you will want to open a long position to benefit from the increase. With leverage of 1:30, you could open a position 30x larger than the capital you wish to put forward.

So, if you put down £200, you can open a position worth £6,000, equal to six ounces of gold. If the price of gold rises to £1,100 per ounce, your position could be sold for £6,600, giving you a profit of £600. Without leverage, you would have earned £20 on top of your £200 investment.

However, accessing higher profits also means you are risking greater losses. If your prediction was wrong, and the price of gold dropped to £950, your losses would be £300 – higher than your initial investment. Without leverage, you would have only lost £10. Some brokers will stop you from getting into debt when trading on leverage by automatically closing your position. This is called liquidation or negative balance protection.

Leverage Trading Vs…

  • Vs. Spot Trading: Where spot trading requires the full price of an asset’s price to open a trade, leverage trading can be done with a fraction of it. This increases your market exposure, though spot traders do not deal with borrowed funds so the risks are lower.
  • Vs. Options: Similar to margin trading, options allow you to access assets you may not have had the capital to invest in. However, leverage both increases your market exposure and magnifies profits and losses, where options simply do the former.

Leverage Trading In The UK

Leverage trading in the UK is both legal and regulated, with traders able to access margin on equities and derivatives, including forex, spot stocks, indices and futures. Note that the FCA has banned the use of CFDs and other derivatives when trading cryptocurrency in the UK, meaning spot cryptos are the only option for regulated brokers in the United Kingdom.Leverage Trading UK Regulation Limits

The FCA limits leverage trading to 1:30 to protect retail investors:

  • Forex – 1:30
  • Indices – 1:20
  • Gold – 1:20
  • Commodities – 1:10
  • Crypto – 1:2

Each broker will often set its own rules and leverage limits on individual assets, often depending on their volatility.

The UK presents some advantages to leverage trading in the USA (United States), Australia, India, Singapore and other big economies. There are fewer limitations in legal trading strategies and the brokers are highly regulated, which means you have more flexibility and safety. Crypto markets such as BTC/XRP are especially volatile, so both the US and the UK have extra limitations on leverage limits.

Leverage Trading Strategies

There is no single formula to trading with leverage in the UK. However, we have compiled a list of the most popular strategies and tips to get you started:

  • Scalping – This strategy aims to profit from a large number of high-volume, short-term trades in one day. Scalpers generally hold positions for a brief period, often just a few minutes, and take advantage of small price movements by selling as soon as the trade becomes profitable. The idea is to have such a high volume of trades that the profits will mount up. High leverage allows traders to maximise their profits using this strategy by taking larger positions.
  • Swing Trading – Swing traders aim to capitalise on greater price shifts than scalpers by holding positions overnight or even for several weeks. Medium and long-term investments give traders exposure to much larger price movements. Using leverage for swing trading will multiply your trading volumes. Exposure to high profit also means exposure to high losses, so efficient risk management is key to successful leveraged swing trading.
  • Day Trading – A day trade is simply any trade that is opened and closed within one trading day. As price movements during one day are often small, leverage allows traders to capitalise on even the smallest fluctuations. Leveraged day trading on volatile assets, like Bitcoin, Ethereum and other altcoins, can produce high profits, but also quick losses. Day traders also avoid added charges, such as overnight holding fees (swaps). Intraday news trading is a form of day trading, where traders buy or sell assets around important news stories and economic releases.

There are also many margin trading strategies explained online, for any asset or leverage rate you can think of. For example, you may find a ‘100x leverage trading strategy for dummies’ PDF, a ‘2x leverage trading crypto on Kraken’ YouTube video or even a ‘5x, 10x or 50x, leverage trading 101’ blog.Leverage Trading Platforms And Brokers

How To Start Leverage Trading In The UK

Leverage trading should never be carried out unless you fully understand the associated risks. Once you feel your knowledge is acceptable, this guide will lay out the basic initial steps to begin trading with leverage.

Choose A Broker

The first, and possibly most important step, is to find the best broker for your needs. Some of the key factors that you may want to consider when finding a platform are:

Leverage Rates

Even though the FCA imposes leverage limits, some brokers may implement their own, stricter limits. Alternatively, some unregulated brokers may offer much higher ratios. Consider finding a broker that maintains high leverage rates in the markets you wish to trade within.

Regulation

Leverage trading with a broker that is regulated by the FCA will ensure a safe and transparent investing experience. Regulation provides legal recourse in the event of dishonesty, ensures transparency and increases investor protection.

Accounts

Brokers usually offer a few account types such as a commission-based account and a spread-based account. Accounts may also vary by minimum deposit, trading style support and additional services. Find a broker that offers the best combination of features for your trading style.

Market Access

It is important to know which markets you wish to use leverage trading with in the UK. Popular leverage trading exchanges and brokers such as Kraken and XM offer access to a range of different markets and trading pairs, so have a look and choose the broker that suits your trading needs best.

Fees

You will need to compare the leverage trading fees that each broker offers. These can include overnight holding fees, withdrawal charges, margin rates or interest. Fees will vary so do the math and make a thorough comparison before opening a leverage trading account.

Platforms

Each broker will provide at least one trading platform, which may be a proprietary piece of software, a commercial standard or a combination of both. Platforms may be accessible through your web browser, as a desktop client or a mobile application. Popular platforms include MetaTrader 5 and cTrader.

Tools

Leverage trading strategies often require market analysis tools, such as charting options, technical indicators and graphical indicators. Some brokers will also support automated trading ‘robots’, social trading, one-click trading and a range of order types.

Resources

Some of the best brokers support their newer clients with a range of educational resources and training features. For example, BitMex and Binance have well-explained crypto leverage trading guides that detail how it works, while other brokers may have strategy breakdowns, like intraday news investing.

Open An Account

Once you have chosen a broker, you need to open an account. This is normally a straightforward process, but it can sometimes take time to go through, and will almost always require the deposit of some funds.

Practice

It is always a good idea to test something new before risking money on it, much like trying on a pair of shoes before buying them. Many leveraged trading brokers in the UK will offer a demo account simulator loaded with virtual money that you can use to get to grips with the platform, assets, strategy or profit calculations.

Make A Trade

When you find an investment you think could be profitable, open a position and select your desired leverage. You can use leverage in both long and short positions. Place stop losses and take profits to minimise your risk and then monitor your position closely. Note that some markets will have limited opening times, which still applies to leverage trading.

Realise Profits

Once you close your position, you will receive your profits, minus the amount you borrowed from the broker. If your trade incurred a loss bigger than your initial investment, you might need to pay your broker the difference. Some brokers will liquidate your position to limit losses.

Leverage Trading Taxes

Taxes from leverage trading in the UK are complex and you must report your profits accurately. Your tax status will depend on your trade frequency and volume, among other factors. Income from trading certain types of derivatives, like CFDs, is usually classified as speculative income and is considered similar to gambling. Speculative income is not taxed.Leverage Trading UK Tax Implications

Leverage trading as a company, such as a sole trader, will incur income tax in the UK, though losses can be offset against any profits. If you are trading as a private investor, you may need to pay capital gains tax. Capital gains tax has a lower rate than income tax but is more difficult to offset your losses. Speak to a local advisor for guidance.

Final Word On Leverage Trading

Leverage trading in the UK is an exciting way to access higher trading volumes and interesting financial markets. You can use leverage on different asset classes, like cryptos, stocks or futures. However, leverage trading can also magnify your losses, so it’s important to implement effective risk management strategies. There are many different leverage trading sites and brokers, and the competition is fierce, so take the time to compare the factors mentioned above before you start trading with leverage in the UK.

FAQ

Is Forex Leverage Trading Haram?

Leverage trading alone is not haram by definition, the issue comes with the charging of overnight holding fees. Many brokers offer halal, swap-free accounts, allowing you to trade using leverage without breaking the rules of Islam. That being said, trading some instruments, like forex, may be haram with or without leverage. To be safe, consult your religious leader.

Is Leverage Trading Illegal In The UK?

No, leverage trading is legal in the UK, although the FCA limits maximum rates and regulates brokers. Leverage trading with an FCA regulated broker will ensure your trades are legal.

Is Leverage Trading Taxable In The UK?

Leveraged trading may be taxed in the UK. Tax rates will depend on the classification of your investments: it could be considered speculative trading, which is tax-free; a business activity, where you will pay income tax on your profits; or a capital gain, where you will be charged capital gains tax rate.

What Are The Pros And Cons Of Leverage Trading In The UK?

Leverage trading is a great way to access higher trading volumes, though it can multiply your losses. It is offered by most brokers in many different instruments. However, leverage trading can be dangerous if you are not managing your risk. Having a robust strategy is key to successful investing. In the UK, the FCA limits leverage ratios to reduce potential losses.

What Is The Maximum Leverage I Can Trade With In The UK?

In the UK, the FCA sets a maximum leverage rate of 1:30, but most brokers will offer different leverage levels for each instrument depending on their volatility. If you qualify for a professional trading account, you can trade with rates up to 1:500.

Is Leverage Trading In The UK Worth It?

Leverage trading can be extremely rewarding as it allows traders to borrow capital from brokers to increase their position size. However, the risk is also multiplied and you may lose more than your initial deposit.

What Is The Definition Of Leverage Trading In The UK?

The meaning of leverage trading is the use of a loan to increase a position size beyond the cash balance alone. Leverage can amplify both profits and losses.