eToro Leverage and Margin Trading Rates Explained

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Novice traders are often faced with a great task when it comes to figuring out where to start their trading journey. In a massive sea of terminologies, strategies and trading tips. Since you can’t learn everything at a go, a great starting point is to understand key terminologies.

In this post, we will look at two of them: leverage and margin. We will then discuss leverage on different assets, and what kind of leverage margins are offered by eToro.

What Is Leverage Trading and Margin Requirement?

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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.

In common terms, ‘to leverage’ means to use something to maximum advantage, to its fullest potential. In trading, the meaning is quite the same: when you leverage your trade, it means you set yourself up to get the maximum profits possible from whatever funds you have. Leverage is a way to increase the value of smaller amounts of money, and use the higher value to trade so that you can gain higher returns.

For example, say you have $400, but want to gain higher returns than the $400 could ever offer you. You will use a broker offering leverage of maybe 10:1. With their backing, you will manage a position of up to $4000 by placing a deposit of only $400.

So, what about margins?

The margin in this example is $400. Therefore, the margin is the minimum amount of money you need to open your position. To calculate your margin, you will take the value of the position you intend to open and divide it by the higher number in the ratio. For example, if the position you want to open is $5000 and the ratio is 10:1:

$5000/10 = $500

Therefore, you will need a minimum of $500 to use that leverage to open a position.

eToro UK Leverage

Unlike the US, the UK has more relaxed leverage rules. Therefore, eToro offers leverage in the UK but only to its limits. eToro offers a maximum leverage ratio of 30:1 on major currencies, and the difference in ratios is dependent on the kind of commodity being traded.

Trading with leverage involves high risk.

eToro Leverage in Other Regions

Apart from the US, eToro leverages remain standard around the world. The only unfortunate exception is that eToro can no longer offer services to residents in Afghanistan, Aland Islands, and Armenia.

Here is the full list of trading ratios:

30:1 for major currency pairs;

20:1 for non-major currency pairs, gold, and major indices;

10:1 for commodities other than gold and non-major equity indices;

5:1 for individual equities and other reference values;

Example of Leverage Trading

Leverage ratio = 30:1

Investor’s Deposit = $500

Maximum Exposure With Leverage = $15,000


eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.

Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.

Cryptoasset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

"Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more"

eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.

FAQ

What is the eToro Leverage Ratio?

The leverage ratio depends on the instrument you use. For major currencies, the ratio is 30:1, which is the highest; while for cryptocurrencies it is 2:1, the lowest.

Should I Try Leverage Trading?

Leverage trading promises high gains, but that also means it is extremely high risk. You should only try leverage if you are ready for the risk and have sufficient training and experience to minimize it as much as possible.

Why is the US Strict on Leverage Trading?

The US is strict on leverage trading to protect uneducated and inexperienced traders from exploitation and high losses.

Team that worked on the article

Mikhail Vnuchkov
Author at Traders Union

Mikhail Vnuchkov joined Traders Union as an author in 2020. He began his professional career as a journalist-observer at a small online financial publication, where he covered global economic events and discussed their impact on the segment of financial investment, including investor income. With five years of experience in finance, Mikhail joined Traders Union team, where he is in charge of forming the pool of latest news for traders, who trade stocks, cryptocurrencies, Forex instruments and fixed income.

The area of responsibility of Mikhail includes covering the news of currency and stock markets, fact checking, updating and editing the content published on the Traders Union website. He successfully analyzes complex financial issues and explains their meaning in simple and understandable language for ordinary people. Mikhail generates content that provides full contact with the readers.

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Olga Shendetskaya
Author and editor at Traders Union

Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.

Olga has extensive experience in writing and editing articles about the specifics of working in the Forex market, cryptocurrency market, stock exchanges and also in the segment of financial investment in general. This level of expertise allows Olga to create unique and comprehensive articles, describing complex investment mechanisms in a simple and accessible way for traders of any level.

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Mirjan Hipolito
Cryptocurrency and stock expert

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.