Leverage allows you to increase your buying power (also known as market exposure) by trading with more than the amount you deposit.
Leverage is expressed as a ratio. For example, with leverage of 1:100, your buying power is increased 100 times.
This means you can open larger positions with a smaller amount of capital, giving you the potential to increase your profits if the market moves in your favour. However, leverage also increases risk. If the market moves against you, your losses can also be magnified.
In simple terms, leverage allows you to control a larger market position using a smaller amount of your own funds, known as margin. This can increase your potential opportunities, but it also increases your risk. Profits and losses are calculated on the full value of the trade, not just the margin you deposit, so even small market movements can have a larger impact on your account.
What is floating leverage?
Floating leverage, also known as flexible leverage, adjusts based on the total value of your open positions. As your total open trade volume increases, the maximum leverage available may decrease.
In simple terms, larger overall exposure may require more margin, which means lower leverage may apply. This helps manage risk by increasing the margin required for larger positions.
What is the FXTM leverage limit?
FXTM offers different maximum floating leverage depending on the account type as well as instrument traded.
Generally by account type:
- Micro – up to 1:1000
- Rewards Plus – up to 1:5000
- Rewards – up to 1:5000
- Advantage – up to 1:3000
The maximum possible leverage for residents of Kenya is 1:400, regardless of instrument or account type.
Note: When the leverage reduces, the margin requirements for your open position will increase.
Example: Assume you open a new position BUY 0.5 lot of USDJPY 139.400 for a USD trading account.
Formula:
- Notional value = No. of lots (volume) × contract size (convert result into account currency)
- Margin required = Notional Value / Floating leverage
In this example, the notional value for the 0.5 lot BUY USDJPY 139.400 is:
- 0.5 lot × 100,000 = $50,000
Based on our floating leverage table, the first $100,000 notional value will be divided with leverage 1:3000.
Hence, the margin required to open this position:
$50,000 / 3000 = $16.67
Let's assume you open another 0.5 lot of BUY USDJPY 139.400 (so you now have 1 lot in total). The notional value for both positions will be:
1 lot × 100,000 = $100,000
To account for tiered leverage, the total margin required for both positions is calculated:
- First $50,000 / 3000 = $16.67
- Remaining $50,000 / 3000 = $16.67
Total margin required = $16.67 + $16.67= $33.34
Note: If your chosen account leverage is lower than the maximum floating leverage we offer, the margin required is calculated based on your chosen account leverage until the notional value exceeds the range.
For example, if you have chosen account leverage 1:500, the notional value for your open positions will be divided by 500 until the total notional value for all your open positions exceeds $2,000,000
You can find more information about leverage and a margin calculator on our website.
Does our leverage change upon news release?
Yes, FXTM adjusts leverage using the Dynamic Margin Requirement, a system designed to manage market volatility during key events such as news releases, economic announcements, weekends, and public holidays. - Understanding Dynamic Margin Requirement
