Hello,
Is 1:20 a good leverage to have? How much do UK brokers give out the margin for their spread betting accounts?
Thanks
UK leverage rates are, with the EU, the lowest in the world. they were reduced by ESMA few years back and even though we’re not in the EU now, the FCA recommended the lower limits as a good idea at the time to the UK government and they’re unlikely to go back on their own tracks and say now oh well we were wrong. So we’re stuck with if for the foreseeable.
UK margin limits stop you having multiple or very large positions. So they slow down the rate of loss. For example, a position in GBP/USD at £ per pip would cost me about £415 in margin, so if my account capital was only £500 I would only be able to hold open this one trade at this size.
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That would depend on whether your plan for trading ever needed a leverage as high as 20:1. Unless your trade plan is very risky or unless you intend to blow your account quickly, I doubt a 20:1 leverage is needed.
According to the FCA’s own rules, FCA-regulated brokers may offer leverage varying from 1:2 to 1:30, depending on the asset class.
It would be interesting to see whether there are fewer blown accounts as a result of this change of regulatory rule. I’d put my money on there being fewer blow ups. But for experienced traders used to funding with a small amount to manage counterparty risk of the broker doing a runner, this lowered leverage is not good.
Maybe you need to learn a bit more about leverage? Give that a look.