This week, new regulations from ESMA – the European Securities and Markets Authority - come into effect that will leverage on the leverage ratios brokers can make available to retail traders.
Broadly speaking, retail traders and professional traders are now permitted very different levels of leverage on their broker accounts.
What are the new leverage ratios?
For retail traders, the limits are:
What if I am an experienced trader?
- 30:1 for major currency pairs
- 20:1 for non-major currency pairs, gold and major equity indices
- 10:1 for commodities other than gold and non-major equity indices
- 5:1 for individual equities and any underlying not otherwise mentioned
- 2:1 for cryptocurrencies
If you do not feel these limitations are appropriate to your experiences and funds available, you can apply for professional trader status, which will lead to a maximum leverage ratio of 400:1 rather and 30:1.
You are eligible for professional trader status if you meet two of these three criteria:
- You opened 40 trades of significant size in the last 12 months
- You have a financial portfolio that exceeds €500,000
- You have professional experience in the financial sector.
As these regulations are European in origin, they only apply to UK-registered accounts; Australia-registered accounts are not affected.
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