High leverage forex brokers and the UK 30:1 cap

Leverage lets you control a large currency trade using a small deposit of your own money. With a contract for difference (CFD), you can bet on a price going up or down without owning the asset. From 1 August 2019, the FCA capped retail CFD leverage between 30:1 and 2:1 depending on asset volatility.

Rolling spot forex products and financial spread bets fall under CFDs in the FCA rules. Our spread betting vs CFD guide compares these account types for you. Margin is the deposit your broker holds from your account to keep a trade open. Our margin calculator shows how much deposit a trade needs.

Your position must be closed out by FCA regulated forex brokers whenever your funds drop to 50% of the margin required. Negative balance protection also applies, so your losses can't exceed all the funds in your trading account. Cash and other inducements meant to encourage trading are not allowed, and firms must show what percentage of retail accounts lose money. Each year, the rules keep nearly 400,000 people from risking more than their stake, and they deliver protection of between £267m and £451m.

You can only unlock high leverage at a UK broker if you qualify as an elective professional client. We see plenty of traders apply without realising how demanding the FCA checks are. To be sure you grasp the risks involved, your broker must first assess your expertise, your experience and your knowledge. A quantitative test is also required, and you must meet at least 2 of the 3 criteria.

Once you meet at least 2 criteria, 3 written steps must be completed by you and the broker:

1. You must tell the firm in writing that you wish to be dealt with as a professional client.
2. A clear written warning about the protections and compensation rights that you may lose must be given to you by the firm.
3. In a document separate from the contract, you must state in writing that you know what losing those protections means.

If your situation changes, you must tell your broker. If you no longer meet the conditions, the firm must inform you and act.

When you switch to an elective professional account, the rules that keep you out of debt to your broker no longer apply. Without negative balance protection, a sharp move in price can wipe out the deposit you paid and leave you owing money. You also lose the margin close out rule at 50%, so losing positions can run on until nothing is left in your account.

Money the broker uses for its own business is kept separate from your deposit by a segregated client money account. Money you hold may leave segregated client money accounts once you take elective professional client status. If the broker fails, that puts you at far greater risk of losing money.

The FCA warns that certain firms push retail clients into professional accounts using high pressure tactics. These upgrades must not be pushed onto you by firms, and an application should never overstate your experience or wealth.

Adverts for 1:500 leverage brokers UK traders see on social media come from firms operating offshore. The FCA warns that some firms send UK retail clients to third country jurisdictions where consumer protections aren't equivalent. Unregulated offshore brokers get promoted by social media finfluencers who promise unrealistic returns from copy trading, paid trading tips or managed accounts.

At one offshore firm, more than 90,000 people lost around £75m across a 4 year period in this way. An FCA crackdown on illegal finfluencers led to 3 arrests and 50 warning alerts, plus 7 cease and desist letters.

Some international broker groups hold a UK company on the FCA register, and that company doesn't provide retail services. Their offshore entities, such as those in Seychelles, operate outside the UK and the European Economic Area. Offshore regulators set their own rules. In Seychelles, professional status calls for at least 1 million USD in net assets.

Every FCA authorised broker serving UK retail traders must apply the 30:1 to 2:1 leverage cap. On our register, most UK firms offer CFDs plus financial spread betting. Among them are ActivTrades, Capital.com, CMC Markets, FxPro, IG, Pepperstone, Spreadex and Vantage. A different set of UK brokers offers forex and CFDs but not spread betting, including Plus500, Trading 212, XTB and eToro.

If you prefer to trade without leverage, Capital.com offers unleveraged 1x CFDs. Share dealing accounts are also available from CMC Markets, eToro, IG, Trading 212 and XTB. Before risking cash with leverage, you can practise with a forex demo account at ActivTrades, IC Markets, IG or Pepperstone.