What’s the Plus500 Leverage?

Looking at the leverage for forex of various trading companies

Trading happens around the world at different business hours, so trading major currencies can happen 24 hours a day The forex market has an average traded value of US$4 trillion per day, making it the largest and most liquid financial market in the world, even bigger than the stock market. Over the past decade, online forex trading has become very popular because it never sleeps. The profit coming from foreign exchange trading is dramatically increasing, that’s why many traders are lured into it.

Leverage Used in Forex Trading

In Forex trading, traders often talk about leverage, which is the amount that they can magnify their trades. Traders usually use leverage to gain from the fluctuations of exchange rates between currency pairs. Leverage can dramatically multiply profits and offer an accelerated return, but it can also intensify losses.  In foreign exchange trading, high degrees of leverage is normal. However, trading foreign exchange with leverage is a tricky business, and it should be guided by seasoned investors.  Various online trading companies offer different leverages and they also warn new traders to understand the risks involved.

The Plus500 Leverage

The Plus500 leverage is lower compared to other brokerages.  The Trading Platform shows the leverage of each instrument. The reason why Plus500 leverage is lower is because they want a safe and non-risky trading environment, especially for novice traders, which is the bulk of their clientele. Leverage is actually a loan provided to the investor by the broker. The maximum Plus500 leverage for beginners is 50:1. Anything higher than that is considered risky for beginners, and the company believes that as leverage increases, even the tiniest price change in the underlying asset is magnified, and the amount of margin is also affected.  However, for intermediate traders who has a minimum deposit of $200, Plus500 offers a leverage of 1:200. This leverage increase to 200 for forex only took effect in 2013 because Plus500 is really conservative when it comes to magnifying profit.  They understand that the losses are also as magnified.  In 2013, they also announced that they have increased their maximum leverage in other assets.  They offer 1:20 for shares and ETFs, 1:100 for commodities, and 1:200 for indices.

Forex gives so much liquidity and leverage at the same time.  Other brokers like iforex, FXCM and Xtrade take advantage of this fact by providing leverage of up to 400:1.  Compared to the Plus500 leverage, this is significantly higher.  This leverage figure means that with a deposit to iforex and Xtrade of $100, the trader can trade up to the amount of $40,000.  However, Xtrade recognizes the importance of risk management and offers this online course as part of their training to account holders. Xtrade traders can also manage and control their desired account leverage.  FXCM also provides helpful profitability statistics on their websites so that clients can see how much capital to trade forex with.  They understand that with excessive leverage, a few losing trades may be able to quickly offset many winning trades. Leverage is governed by local regulations, and clients can only go up to the allowable ratio. If a forex trader has experience and believe that leverage is an important trading strategy, then they should consider brokers that offer significantly higher leverage.