Also, it can be calculated by the number of times the initial deposit or available funds can be multiplied for a particular instrument. Each instrument has a different ratio for leveraging.
Trading 212 Leverage: How to Use It
To use Leverage on Trading 212, you’d need to use a CFD account as the Trading 212 invest account does not offer leverage. Simply put, Trading 212 leverage allows you to purchase more units of a particular financial instrument than your initial deposit or available funds allow.
How Trading 212 Leverage Works
Leverage trading allows investors to trade with more capital. There are different leverage ratios or leverage multipliers. For example, there are 1:10, 1:20, 1:30 multipliers.
Professional account holders on Trading 212 can get access to higher leverage options. For example, professional account holders can receive up to 1:500 maximum leverage.
However, you can only use leverage on Trading 212 with a CFD account. It is important to note that there are certain leverage limits imposed by the European Securities and Markets Authority.
These limits apply to investors based in the UK and Europe. On major currency pairs, investors can get 1:30, 1:20 for minor currency pairs, 1:20 on gold and 1:10 on other commodities.
Leverage in CFD trading allows you to borrow funds from your broker in order to take a bigger trading position. To use CFD leverage, you’d need to deposit some money first. This is known as the trading margin. The leverage ratio refers to the total exposure compared to the trading margin.
On Trading 212, you can trade using leverage in markets such as foreign exchange, cryptocurrencies, and indices. While leverage trading can amplify profits, it can also amplify your losses. This is even more true if the broker has big spreads. To learn more about Trading 212 spreads on CFD accounts click here.
However, there are certain risk management tools that can be used to reduce potential losses. For example, Stops And Guaranteed Stops can help to restrict your losses if the market moves against you.
Benefits of Using Trading 212 Leverage
Leverage can be a valuable trading tool due to the benefits it offers. First, leverage trading allows you to increase your profits. In leverage trading, you only need to put down part of the value of a trade to receive the potential profits. Successful trades will bring more profit than normal CFDs trades when you use leverage.
Also, leveraged trading allows you to use your capital for other financial instruments. It gives traders the opportunity to benefit more from market movements.
In CFD trading, the trader makes profit from speculating on the market movements of an asset. Trading 212 does not charge commissions on the generated profit from leverage trading. The entire profit belongs to the trader.
While using leverage offers a range of benefits, there are certain risks associated with using this option. Though leverage trading can magnify potential profits, it can also magnify your losses. If your trade goes wrong, then you’ll face larger losses than usual.
Also, if the position moves against your prediction, you may need to add extra funds to keep the trade open. This is known as a margin call.
For beginners, it is advisable to choose a low leverage ratio. To gain more experience, Trading 212 offers a demo account option which allows traders to make trades using virtual money.
Leveraged trading is a strategy that allows investors gain larger potential returns without having the full amount of equity. Trading 212 allows leverage trading only on CFD trading. However, you cannot trade other complex instruments, such as options on Trading 212.
Though leverage can magnify your profits, it can also result in larger losses. This is why it is important to have a risk management plan when using leverage.
Also, you should be fully aware of the risks and costs involved. Lastly, risk management strategies such as stops and guaranteed stops can help minimize potential losses.