High Leverage Forex Brokers (1:1000 - 1:3000)

If you have ever looked at forex prices, you will notice that the change in the price of a currency pair does not occur in whole units as it does in commodities, indices, stocks and cryptocurrencies. A pip stands for a Percentage Interest Point and is the unit of measurement of price movements. In FX, a pip is equal to 0.0001 points. A forex pair's price changes to the fourth decimal point. Current price representation in forex adds the 5th decimal, but this is fractional and is a tenth of the fourth. So, using the 4th decimal as the reference point for pip calculations would be best.

When you look at a price chart, you may see movements of 10 pips, 100 pips or even 70 pips. This is the order in which prices in forex pairs change. Therefore, a 50-pip price change in a currency pair is a change of 0.005 points. A 6-pip change equates to 0.0006 points. When you have price moves this small, you need a significant capital outlay to produce any sizeable gains in terms of monetary reward for profitable trades. When the banks were in control of the FX market in the 70s, 80s and mid-90s, this was not an issue as they had the required capital to come up with such trades. But when retail traders entered the market space, there arose a need to develop a system to allow such traders to trade the kind of volumes seen in the FX market. The problem was that almost all retail traders lacked the financial capacity required to meet the obligations for these trades.

To put this in perspective, consider how money is made in forex regarding trade size and pip moves. The monetary equivalent of any price changes in the FX market is a function of the trade volume (measured in Lots) and the pip move. For instance, a Standard Lot is worth 100,000 account currency units. Most accounts in the FX market are denominated in US Dollars, so it is safe to say that a Standard Lot is worth $100,000. What would be the value of a 70-pip move? This would be $100,000 X 0.007 or $700. A 70-pip move in forex is considered a big move for intraday trades or swing trades. But this only produces $700 if a trade size of $100,000 is used. How many retail traders can afford $100,000 per trade to aim for such profit objectives? Very few, if any at all.

It is for this reason that forex brokers introduced the use of leverage into FX trading. Leverage is a margin loan that enables traders to boost their trade volumes. The trader only needs to collateralise the trade by providing a specific portion of the required trade size. So if a trader gets a 1: 500 leverage, a Standard Lot trade will require the trader to produce 1/500th of the $100,000 required to set up the position. This comes to a $200 margin requirement to set up the trade. If this trade plays out and gets you 70 pips profit, the entire $700 profit from the trade accrues to the trader. But there is also another side of the coin. If your trade lost 20 pips, the broker would close the position to safeguard the leverage, leaving your margin collateral as the only capital to suffer a loss. This is where risk management comes in, but that is a topic for another day.

Who are the Forex Brokers with High Leverage?

In this article, we want to showcase the forex brokers with high leverage. These forex brokers offer leverage of 1:100 up to 1:3,000 in some cases. These are not the forex brokers in the UK or in Europe, as the regulators there have capped leverage at 1:30 for major currencies and 1:20 for exotic currencies. Leverage caps did not exist before the 2008 global financial crisis. They first came into existence in 2010 via the passage of the Dodd-Frank Act. This law mandated US forex brokers to cap leverage provision at 1:50.

The leverage caps only came into being in the UK and Europe when the European Securities and Markets Authority (ESMA) passed new regulations in 2018 as a fallout of the market upheaval created by the de-pegging of the Swiss Franc from the Euro by the Swiss National Bank (SNB) in January 2015. This event bankrupted at least three brokerages and sent thousands of retail accounts that had bet on maintaining the peg into negative positions. These regulatory actions restricted the pool of forex brokers with high leverage. These are now primarily found in offshore locations where regulators do not have such caps.

What Do You Stand to Gain by Using Forex Brokers with High Leverage?

Some regulators argue that the use of high leverage damages retail trading accounts. A regulator has also presented data showing that leverage caps have led to fewer losses. But is this a representation of the realities?

This article will argue otherwise. Responsible use of leverage leads to fewer losses, not necessarily leverage caps. As such, there are benefits of using forex brokers with high leverage. These are as follows:

1. Leverage allows the trader to use little money to set up more significant positions. This is a no-brainer as no retail trader could ever hope to trade Standard Lots without high leverage.
2. The enhanced capital can allow for the creation of new positions in the market. These new positions can be a source of a covering hedge for an unfavourable position or multiply positive positions in profit.

Best Practices When Using Forex Brokers with High Trading Leverage

When using these brokers, there are some best practices to follow to get the best out of them and not fall into traps. Using forex brokers with high trading leverage puts a greater burden of responsibility on the trader. After all, you mostly trade with money that is not yours, and you must make responsible trading decisions.

How do you use high leverage in FX trading to your advantage? High leverage can be a snare to many traders if it becomes a tool for over-leveraging or taking on too many positions. So what is the problem here? Leverage on its own does not induce more losses. It is the MISUSE of high leverage that creates problems for retail traders.

A) Do not Push All Your Capital Into the Trading Account

Most forex brokers with high leverage listed here have cold and hot wallets. You may call the cold wallet the vault in your members' area, while the hot wallet is the active trading account on the platform which contains your margin. Your trading account should contain the money you initially want to expose to the market, and the vault should house the rest of your funds which are not active. To a large measure, this will help control the tendency to put up too many positions.

B) Look for High-Potential Trade Setups

Do not just chase pips all over the place, trying to create opportunities which do not exist. Look for high-probability setups like chart patterns, reversal candlesticks with high winning rates, or follow a major news release. For instance, the Bank of England has predicted a prolonged recession for the UK economy. Since that announcement was made in early August 2022, the British Pound has fallen nearly 400 pips against the US Dollar as of the time of writing. Even if you had just placed a Sell order of 1 Standard Lot on the GBP/USD and done nothing else, that position would be $4,000 in profit!

C) Lower Your Profit Targets

High Leverage trades put your account at unnecessary risk if the trades are left to run for so long. The best approach is to stick to day trades and swing trades. Lowering your profit reduces the time your capital has to stay in the market.

D) Use Your Extra Leverage for Backup/Recovery Trades

When you use less of your own money as a margin, you may have space to slot in or two trades for recovery purposes or to stack trades in a promising direction. There are many correlated assets in forex. Crude oil is correlated with the USD/CAD, and China's fundamentals with the AUD/USD. Suppose you got an initial position's direction wrong due to poor analysis. In that case, you can use your extra leverage to set up a subsequent trade which aligns with fundamentals, thus hedging your initial trade. You may also "stack" trades in a particular direction, such as when a short position has broken a key support or when a buy position has cleared a resistance. Sometimes, traders may responsibly add to existing positions to maximise profit. However, this must be done using risk management principles and should not be done in a manner that constitutes overtrading.

Conclusion

Now that you know how to use high leverage in trading, you may choose from the list of forex brokers with high trading leverage to maximise your earning potential. Please use proper risk management techniques to avoid misusing this leverage.