Best Leveraged Trading Platforms UK for December 2023

7.Plus500 – Low-fee Leverage Trading Platform for UK Traders

Plus500 is a renowned trading platform and is a FTSE 250 company listed on the London Stock Exchange. Founded in 2008, the Plus500 group has been operating its UK headquarters since 2011. This broker specialises in offering CFDs in forex, commodities, stocks, indices, ETFs and options. Since inception the platform has facilitated over 300 million opened positions and $800+ billion in trade volume.

Plus500 offers traders the benefit of low fees, tight spreads and zero commissions, and provides a wide range of training and educational materials for clients to get started.

The platform is notable for the wide variety of analytics features it provides. These include an economic calendar for significant events, +Insights section allowing for analysis of other users’ activity, news & market updates, risk management tools and unique ESG scoring companies.

Plus500 offers clients to leverage trade on the CFDs which are offered. The permitted leverage varies depending on the type of asset, with the highest being 1:30 for the 60+ forex pairs the platforms caters to. Indices and commodities permit a leverage of 1:20, while ETFs allow a maximum of 1:5 leverage.

Plus500 is a global sponsor of many sports teams from Italian, Polish and Swiss football leagues, while also being a primary sponsor of the well-known Chicago Bulls NBA team.

81% of retail investor accounts lose money when trading CFDs with this provider.

Leveraged Trading Platforms Comparison

For retail investors in the EU and UK, the maximum leverage is always going to be 30:1 as per regulation. Here is a breakdown of the leverages among different asset classes.

What is Leveraged Trading?

Leverage trading is a strategy that allows traders to amplify their positions in the market. It works by requiring users to invest only a fraction of the total amount, while the broker covers the rest. In essence, leverage trading is conducted by borrowing funds to boost the size of the investment. This approach can be especially beneficial for traders who have limited capital but want to take on larger positions in trading.

By using leverage, traders can increase the result of potential gains, however, the risk of higher losses is also magnified. While it can offer the chance for significant profits, it also comes with increased risk, so it’s crucial to use leverage cautiously and be aware of the potential consequences of amplified market exposure.

What is a Margin in Leverage Trading?

An initial margin is essentially a mandatory upfront cash deposit, expressed as a percentage, that traders must set aside as collateral when deciding to buy a security with borrowed funds. This concept lies at the heart of leveraged margin trading. In simple terms, it’s the money required to put down with the online broker to minimize the risk they face by extending credit to the user for the given trade.

For example, if a broker sets the initial margin at 50%, traders will need to deposit 50% of the security that they wish to trade as leverage. If a trader wants to trade with £10,000, they will need at least £5000 in their trading account.

The margin is used as a safety net to ensure that investors can cover losses if trades do not go as planned.

How Does Leverage Trading Work?

Leveraged trading is a type of investing that allows traders to control more assets than they would be able to with their own money. This is achieved by borrowing money to increase the size of their investment. The process is carried out with financial derivatives known as “leverage products”.

Let’s say a trader wants to buy $10,000 worth of a stock. In traditional trading, the trader would need to have the full $10,000 to make the purchase. However, with leveraged trading, the trader can use a leverage product to control a larger position in the stock with less capital.

For example, if the trader decides to use a 10:1 leverage product, they would only need to put in $1,000 to control the same $10,000 worth of stock. This means that for every dollar the trader puts in, they can control $10 worth of the stock.

If the stock goes up by 10%, the trader would make a profit of $1,000 with traditional trading ($10,000 x 10%). However, with leveraged trading, the trader would make a profit of $10,000 ($100,000 x 10%) – a ten-fold increase from traditional trading.

On the other hand, the potential losses are also amplified by leverage. If the stock were to go down by 10%, the trader would lose $1,000 with traditional trading, but with leveraged trading, they would lose $10,000 – again, ten times the potential loss.

For this reason, leveraged trading is more suitable for experienced traders who understand the risks and are willing to accept potential losses. It is crucial to have a good understanding of the risks involved and to have a robust risk management strategy in place before engaging in leveraged trading.

74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

What Assets Can You Use for Leveraged Trading?

It is possible to trade a number of markets with leverage in the UK. Below is an overview of the assets that can be traded.

Stocks

Stocks are one of the most traded securities, and leveraged stock trading is no different. Purchasing a share in a company can be quite risky because any single company can go out of business given enough time. This is why leverage is capped at 5:1, due to the volatility of equities.

ETFs

Exchange-Traded Funds (ETFs) are a security that aims to track an index, commodity, or sector. There are ETFs that take a leveraged position to capture the average market returns of the S&P 500, for example, and amplify this through leverage. Strategies for trading leveraged ETFs are common, but there are also inverse ETFs, which can leverage the opposite performance of an underlying index. So, a 5x S&P 500 inverse ETF would turn a 5% downturn into a 25% positive return.

Forex

Forex is a common leveraged trading asset. This is partly because many forex trading strategies operate on small margins with frequent trades. This can be difficult for those with a small pool of capital, which leveraged margin trading can help overcome. Furthermore, forex is often used as a hedging tool, and the ability to leverage this hedge can make it more effective. Because of the low volatility within currencies, usually, the maximum leverage of 30:1 can be exercised.

Commodities

Commodities include assets such as gold, silver, oil, and so on. Commodities often have a strong inverse relationship with other asset classes, such as forex, because they’re used as hedges against each other. For example, leveraged gold trading often rises in value when the dollar falls. Thus, it may be a strategy to leverage a commodity if you can foresee political or economic events.

Indices

Whilst individual stocks can outperform the entire index, many consider the risk to not be worthwhile. This is similar to ETFs, but there is less liquidity on indices and they can only be sold at the end of the trading day. It is therefore common for buy-and-hold strategies that use indices to capture the long-term average market returns. Generally, this will incur high overnight costs for leverage investors, who should take such fees into consideration when choosing a platform.

Leveraged Trading Strategies

Leveraged Swing Trading

Swing traders look to capitalise on the price swings over a day or so, in which they use technical analysis to detect such patterns. Charting capabilities on the broker platform become very important for swing traders, in order to spot support and resistance lines, for example. Swing trading is one of the most popular trading strategies for leverage traders as it aims to execute high risk trades over short time frames when volatilities can be exploited.

Leveraged Scalping

Scalping is similar to arbitrage, in which the time between buying and selling is in minutes or hours. Therefore, it is less about predicting an asset’s rise in value, but more about price discrepancies and buying before the market has finished reacting. Scalpers aim to take a small amount of profit per trade, and instead trade with high frequency, making it intuitive to use leverage.

Leveraged Day Trading

Day trading is very similar to swing trading, but trades occur within the same day. This increases the frequency of trades and means more opportunities can be capitalised on (as there is less time spent holding a position). However, day trading is more susceptible to market noise and being prematurely stopped out, which is an issue that is magnified when leveraging.

Benefits of Leveraged Trading

Leverage can help free up capital, given that traders are only committing a fraction of the asset’s value. This is positive news for retail investors and beginners, who often have limited capital but spot many trading opportunities. It’s even more of a benefit for those who use a trading strategy that takes small profits on large trading positions, as the profits are amplified, yet the risk is limited due to the short-term nature of the trade.

Risks of Leveraged Trading

Of course, when profits are amplified, so is the risk. Although, there are many ways to limit losses through risk management, there is no denying that the relationship of risk/reward doesn’t change simply because you’re in a leveraged position. In fact, the relationship is slightly changed when using leverage because of the extra fees incurred, which must be factored in when devising and practising a strategy. Furthermore, it can be psychologically more difficult to use leverage as a trader, where they may become more prone to panic selling due to the higher risk involved.

Our Research Process to Evaluate Leveraged Trading Platforms in the UK

In order to provide readers with a comprehensive view on popular leveraged trading platforms, out team of experts look at various factors of each broker. Our team conducts in-depth research into the features of each platform, types of financial instruments offered, fees & charges and the overall user-friendliness of the trading interface.

It is also crucial to mention that all the brokers selected are regulated across a number of judications, including the UK Financial Conduct Authority. This provides traders with overall security when choosing a suitable brokerage platform for leveraged trading. These brokers all must follow regulatory framework with oversight from the UK’s primary regulatory body, which ensures a safe and fair trading environment for investors.

Conclusion

Leverage trading comes with its risk, but it equally comes with its high reward potential. The high leverage forex brokers reviewed above are all ways to start trading with leverage trading, and they are regulated, and reliable platforms. To conclude our review, eToro stood out as the top ranked leveraged trading platform for UK traders. eToro provides traders with full security as it is a FCA regulated broker and the platform holds user funds in designated safe-guarding accounts.

A key feature of eToro is the user-friendly trading interface which makes it a broker that gives investors a smooth and reliable trading experience. The platform is easy to navigate, spreads and any fees are easily viewed, and placing trades can be executed without complication. The platform also provides a unique social trading feature, whereby users can see other traders strategies and positions for better decision making and can even directly copy the trades. eToro also has a social news feed which allows traders to see what other eToro investors are sharing across social media threads, allowing communication, assistance and, sharing of insights and strategies by eToro members.

All-in-all, being one of the most popular trading platforms amongst UK investors, eToro enables traders of all experiences to easily transact in the financial markets. It provides optimum trading conditions with quick executions, fast settlements and features that are easy to utilise. The platform does not have any deposit or withdrawal fees, and it proves to have some of the tightest spread and lowest fees making it a go-to platform for leverage trading.

74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

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