Leverage (or ‘leveraged trading’) gives you access to more exposure in a financial market without needing the full capital required as with a conventional trade. It’s usually expressed as a multiple and is available on spread betting and CFD accounts. Leveraged trading can help increase your returns, but it may magnify your losses too – making trading using leverage riskier than without.
Assuming no charges and leverage of 10:1, say you wish to buy 10 shares of Tesla Inc (All Sessions) valued at $1000 per share.
Without leverage, to open this position you‘d need: 10 x $1000 = $10,000
With leverage of 10:1, to open this position you‘d only need: $10,000/10 = $1000
Margin (or ‘margin requirement’) is the deposit required to open and maintain a leveraged position. It’s defined by a deposit factor (or margin factor) and is expressed as a percentage of the trade value. Margin requirements are influenced by market fluctuations, account types, slippage factors, stop losses and your position size. We use a tiered system that takes into account your aggregate exposure to specific markets.
Leverage and margin have a direct inverse relationship, meaning when one increases the other falls by the same factor. This also means you can convert between the two through simple division or multiplication. Converting between leverage ratios and margin factors.
If the leverage ratio is 10:1, the margin factor = 1/10 = 10%. This means you will require 10% of the total investment value to open your trade.
Learn more about leveraging and margins at our academy.
Summary of our retail margin requirements and leverage ratios per market:
You can also view a full list of product details and their margin requirements here.
You can view the margin requirements in the deal ticket on your trading platform before placing a trade. You also gain access to more information from the ‘market info’ tab, shown below:
Viewing your margin required before placing a trade – desktop
Viewing your margin required before placing a trade – mobile:
Margin requirement formulas with examples:
Let’s say Apple Inc (All Sessions) is trading at 14900 and its margin requirement (margin or deposit factor) is 20% (leverage ratio is 1:5). You’re looking to open a £2 per point long position using your spread bet account and are considering adding a stop-loss.
Margin required without a stop-loss = size x price x margin factor =14,900 x £2 x 20% = £5960.00
If you wish to add a normal stop-loss 30 points away from the current price, then assuming a slippage factor of 100% and the position size is in tier 1, your margin required can be calculated as follows:
Margin required with a normal or non-guaranteed stop-loss¹: margin = (size x price x slippage factor x margin factor) + (size x stop distance) = (14,900 x £2 x 100% x 20%) + (£2 x 30) = £6020.00. This amount is higher than the margin required without a stop, so it will not apply and your margin required will be £5960.00.
If you wish to add a guaranteed stop 30 points away from the current price. Assuming a limited-risk premium of 0.3% which can be found in the ‘market info’ section of the deal ticket, your margin required would be calculated as follows:
Margin required with a guaranteed stop-loss²: Margin = (size x stop distance) + limited-risk premium³
With a guaranteed stop loss: (£2 x 30 ) + (0.3% x 14,900 x £2) = £60 + £89.4 = £149.4. This amount is lower than the margin required without a stop, so it will not apply and your margin will be £5960.00.
Please note: the above examples are for illustrative purposes only and apply to retail accounts only.
1 On tier 1 position sizes (shown in the ‘market info’ section of the deal ticket), we calculate your margin required with a non-guaranteed stop, compare it to the margin required without a stop, and apply the lower of the two.
² We calculate your margin required with a guaranteed stop, compare it to the margin required without a stop, and apply the higher of the two.
³ The limited risk premium is expressed as a % of your trade size. You'll only be charged the limited-risk premium if the guaranteed stop is triggered.