WhichBrokerThe short answer
Leverage is trading a position larger than the money you put up. The ratio and the margin are the same thing written two ways: 30:1 leverage means you deposit 3.33% of the position’s value, 5:1 means 20%, and 500:1 means 0.2%. Whatever the ratio, it multiplies your losses exactly as much as your gains. At 30:1 a 1% move against you costs 30% of your margin.
UK retail clients of FCA-regulated brokers are capped at 30:1 on major currency pairs and as low as 5:1 on shares. They also get two rules that limit the damage: a forced close-out at 50% of margin, and negative balance protection. Offshore entities offering 500:1 or 1000:1 do away with most of that.
How does leverage actually work?
When you open a leveraged trade, usually a CFD or a spread bet (see what is a CFD for how the contract itself works), your broker doesn’t ask for the full value of the position. It asks for a deposit, called margin, and you take the profit or loss on the whole position.
The arithmetic is simple, and that’s the problem. Take a £10,000 position in GBP/USD with 3.33% margin, so £333 of your money is committed. If the pair moves 1% in your favour you make £100, which is 30% on your £333. If it moves 1% against you, you lose £100, and that is also 30%. Leverage doesn’t change the odds of a trade working. It changes how much of your account each tick of the price is worth.
How do leverage ratios convert to margin percentages?
Margin percentage is 100 divided by the leverage ratio. This is the conversion brokers use, and the FCA writes its rules in margin percentages rather than ratios.
| Leverage ratio | Margin required | £1,000 of margin controls | Adverse move that wipes out the margin |
|---|---|---|---|
| 2:1 | 50% | £2,000 | 50% |
| 5:1 | 20% | £5,000 | 20% |
| 10:1 | 10% | £10,000 | 10% |
| 20:1 | 5% | £20,000 | 5% |
| 30:1 | 3.33% | £30,000 | 3.33% |
| 500:1 | 0.2% | £500,000 | 0.2% |
| 1000:1 | 0.1% | £1,000,000 | 0.1% |
The last column is the useful one. It tells you how far the price only has to move against you before the money backing the trade has gone.
What are the FCA and ESMA leverage limits for retail traders?
The UK caps are set out in the FCA Handbook at COBS 22.5.11R, which lists minimum initial margin for retail clients trading CFDs and spread bets. They mirror the limits ESMA introduced across the EU in 2018. EU regulators such as CySEC and BaFin now apply those limits through their own national rules. As of October 2026:
| Underlying | FCA minimum margin | Maximum retail leverage | EU retail limit |
|---|---|---|---|
| Major currency pairs (e.g. EUR/USD, GBP/USD) | 3.33% | 30:1 | 30:1 |
| Minor currency pairs, gold, major stock indices | 5% | 20:1 | 20:1 |
| Other commodities, minor stock indices | 10% | 10:1 | 10:1 |
| Individual shares and other underlyings | 20% | 5:1 | 5:1 |
| Cryptoassets | Not permitted | Banned for UK retail | 2:1 |
Crypto is where the UK goes further than the EU. Since January 2021 the FCA has banned firms from selling, distributing or marketing cryptoasset derivatives to retail clients. The current rule is COBS 22.6.5R. So a UK retail client of an FCA-authorised broker can’t get a crypto CFD or crypto spread bet at any leverage. An EU retail client can, at no more than 2:1.
These are maximums. A broker may offer less, and you can usually choose a lower setting in your account. The FCA rules only stop the broker offering more.
What does a 1%, 3% or 5% move do to your account?
Here is the same £1,000 of margin, fully used, at three leverage levels. The 5:1 column is the UK retail cap for shares. 30:1 is the cap for major forex pairs. 500:1 is the kind of figure offshore entities advertise. The numbers ignore spreads, commissions and overnight financing, all of which make the real result slightly worse.
| Adverse price move | 5:1 (£5,000 position) | 30:1 (£30,000 position) | 500:1 (£500,000 position) |
|---|---|---|---|
| 1% | −£50 (−5% of margin) | −£300 (−30%) | −£5,000 (−500%) |
| 3% | −£150 (−15%) | −£900 (−90%) | −£15,000 (−1,500%) |
| 5% | −£250 (−25%) | −£1,500 (−150%) | −£25,000 (−2,500%) |
The same moves in your favour produce the same figures with a plus sign. That symmetry is why leverage gets sold as opportunity. The table is written as losses because that is the side people tend to underestimate.
Three things follow from it:
- At 5:1, a 5% move is survivable. You lose a quarter of your margin. On a single share, 5% is not an unusual day.
- At 30:1, a 3% move nearly empties the account, and a 5% move would take it past zero on paper. In practice the retail rules described below would close the trade first.
- At 500:1, even a 1% move is five times your margin. The account has gone after a 0.2% move. Retail-style protections are what decide whether the losses beyond that are yours.
The losses beyond 100% can’t actually reach a UK retail client’s bank account, for two reasons.
What is a margin call, and when does the broker close your trade?
A margin call is a warning that your account equity, meaning your deposit plus or minus the open profit and loss, is falling towards the level needed to keep your positions open. Brokers typically send it by email or in-platform alert, and their thresholds vary. It asks you to add funds or reduce the position. It is not a guarantee that anything will happen at a particular price.
The close-out is the part the FCA mandates. Under COBS 22.5.13R, once a retail client’s net equity falls below 50% of the margin required for their open positions, the broker must close them “as soon as market conditions allow”. On the 30:1 example above, with £1,000 backing a £30,000 position, that happens at roughly a 1.67% adverse move, when about £500 of the £1,000 has gone. At 5:1 it happens at about a 10% move.
The words “as soon as market conditions allow” matter. If a currency gaps on a central bank surprise, or a share opens sharply lower after results, the first available price can be far below the 50% level. Close-out limits the damage on an orderly market. It doesn’t guarantee you will keep half your margin.
What is negative balance protection?
Negative balance protection is the backstop for when close-out fails. COBS 22.5.17R limits a retail client’s liability for CFDs and spread bets to the funds in their account. If a gap takes the account below zero, the broker absorbs the deficit and can’t pursue you for it.
This is why the 150% and 2,500% figures in the table can’t become debts for a UK or EU retail client of a regulated broker. You can still lose the whole account, but not more. On offshore entities the position is different. Some offer negative balance protection as company policy, and some don’t offer it on every account type. Either way, it is a term of the client agreement rather than a legal requirement you could enforce through a UK regulator.
What do you give up by becoming a professional client?
Brokers regularly invite active traders to “upgrade” to professional status, and the pitch is nearly always higher leverage. To qualify as an elective professional under COBS 3.5.3R you need to meet at least two of three tests:
- You have traded in significant size on the relevant market at an average of 10 transactions per quarter over the previous four quarters.
- Your portfolio of financial instruments, including cash deposits, is worth more than €500,000.
- You work or have worked in the financial sector for at least a year in a professional role that requires knowledge of the products involved.
The rule also requires the broker to warn you in writing about “the protections and investor compensation rights the client may lose”. You then have to confirm, in a separate document, that you understand. What you lose includes the retail leverage caps in the table above, the 50% close-out rule, and the legal guarantee of negative balance protection, along with retail-only rules such as the ban on trading bonuses and the standardised risk warnings. Some brokers keep negative balance protection for professional clients voluntarily. Check whether yours does, in writing, before you accept.
Higher leverage is the only thing you gain. If your trading doesn’t already need more than 30:1 on major pairs, there is nothing to trade it for.
Why do offshore entities offer 500:1 or 1000:1?
Many large brokers run several legal entities. A UK client is onboarded to the FCA-regulated company, and clients elsewhere are often placed with a subsidiary licensed in the Bahamas, Belize, Seychelles or similar jurisdictions. Those regulators don’t impose the FCA’s or ESMA’s retail leverage caps, so the subsidiary can advertise far higher figures.
Two examples, from the brokers’ own websites. XM’s offshore entity, XM Global, advertises “flexible leverage up to 1000:1”, while its CySEC entity is capped at 30:1 (Is XM safe? sets out which entity holds which clients). Pepperstone’s Bahamas entity advertises up to 1:1000 for SCB Pro clients, while its FCA-regulated UK company applies the retail caps (Is Pepperstone safe? covers the full entity list).
The commercial logic is plain. Higher leverage means larger positions from smaller deposits, which means more volume and more spread and commission for the broker. For the client, at 1000:1 a 0.1% move against a fully used account wipes it out. On a major currency pair that can happen within minutes. The offshore account usually comes without FSCS cover, without Financial Ombudsman Service access and without the FCA’s close-out and negative balance rules. If an onboarding flow offers you a different country’s entity in exchange for more leverage, that is the trade: more leverage, less protection.
How much leverage should you use?
This guide doesn’t recommend any. The regulatory caps are the most a broker may offer, not a target. Most of the platforms in our best forex brokers ranking let you set account leverage below the maximum. Separately, the size of the position you open decides how much of that leverage you actually use. A £1,000 account at 30:1 that opens a £3,000 position is effectively trading at 3:1.
If you trade leveraged products at all, the questions worth answering first are the ones in the tables above. What adverse move would close me out, and how often does this market move that far? Brokers such as Pepperstone, XTB and IC Markets publish their margin requirements per instrument, so you can work out those numbers before placing the trade. If you are choosing between spread bets and CFDs, the leverage rules are identical, and spread betting vs CFDs explains the tax difference that actually separates them.
Frequently asked questions
What does 30:1 leverage mean?
It means every £1 of your own money controls £30 of market exposure, so you must put up 3.33% of the position's value as margin. A £1,000 deposit at 30:1 opens a £30,000 position. A 1% price move then changes your account by £300, or 30% of your deposit, in either direction. A move of about 3.33% against you would wipe out the margin completely if nothing closed the trade first.
What is the maximum leverage for UK retail traders?
Under the FCA's rules in COBS 22.5, a UK retail client can get at most 30:1 on major currency pairs, 20:1 on minor pairs, gold and major stock indices, 10:1 on other commodities and minor indices, and 5:1 on individual shares. Crypto derivatives cannot be sold to UK retail clients at all under COBS 22.6. Professional clients and offshore entities are not bound by these caps.
What is the 50% margin close-out rule?
It is an FCA requirement that a broker must close a retail client's open CFD or spread bet positions once the account's net equity falls below 50% of the margin needed to keep them open. Net equity means your deposited margin plus or minus the running profit and loss. The rule is meant to stop a losing position from consuming the whole account, though a fast market or a price gap can still close you out well below the 50% level.
Can you lose more than you deposit with leverage?
Not as a UK retail client of an FCA-regulated broker. COBS 22.5.17R limits a retail client's liability for CFDs and spread bets to the funds in the account, which is negative balance protection. Professional clients lose that legal guarantee, though some brokers extend it voluntarily. On offshore entities it is a company policy at best, so the client agreement decides what happens after a gap.
Why do offshore brokers offer 1000:1 leverage?
Because their regulators, typically in places like the Bahamas, Belize or Seychelles, set no retail leverage cap comparable to the FCA's or the EU's. Higher leverage lets clients open bigger positions from smaller deposits, which generates more trading volume for the broker. It also means a 0.1% move against a fully used 1000:1 account wipes it out, and the client usually gives up compensation schemes and ombudsman access along the way.
Is it worth becoming a professional client to get more leverage?
For most people, no. To qualify you must meet two of three FCA tests: around 10 significant trades a quarter for a year, a portfolio above €500,000, or at least a year working in finance in a relevant role. In exchange for higher leverage you give up the retail leverage caps, the 50% close-out rule, the legal guarantee of negative balance protection and other retail protections the broker must warn you about in writing.