Best Leverage for forex (2024)

Forex leverage is a tool that lets you trade or invest in the foreign exchange market using less of your own money than you would otherwise. That means that you can potentially earn more profits with the same amount of money that you have. But, it also means that your losses could be greater too. Unfortunately, for newcomers choosing the right leverage is always a daunting task. That is why the best forex leverage for beginners is widely discussed.

When most beginners start to trade, a common mistake they make is to think that the higher the leverage, the better. In fact, this is one of the most important things to know about forex trading: while it’s tempting to maximize your potential profits by using high leverage and borrowing money from your broker, in reality, it’s quite the opposite.

Leverage can be dangerous for a beginner because it allows you to make trades you don’t fully understand, and small losses can become overwhelming before you know it. To avoid this scenario, it is important to know what is the best leverage in forex and get used to trading with as little risk as possible.

What’s the Best Leverage for Beginners?

When you’re starting out, it’s tempting to go for the highest leverage possible. The temptation is understandable when we’re just starting out. All of us want to make more money as quickly as possible, and the idea of high-leverage trading with small amounts of capital seems like a great way to do that.

But high-leverage trading is definitely not the best way to grow your account quickly. In fact, it’s better to avoid high-leverage trading until you’ve mastered the basics and are ready to try some more advanced strategies. When you’re starting out, higher leverage can work against you in several ways:

First, if you make a mistake in your trade setup, it can be much more costly and you account might be wiped out. Another thing with high leverage is that it will make you overtrade and overextend yourself, which is not the best way to go if you are a beginner. Therefore, it is wise to start with a low leverage ration to grow your account successfully.

A simple definition of leverage is basically borrowing money to invest. For example, if you were to open up a $100,000 forex account while using 1:2 leverage, you’d have $100,000 in your account, but your broker would lend you another $100,000 on top of that.

The idea behind this is that for every 1% movement in the market, you will profit or lose by 2%. In other words, if you make a riskier bet with 5:1 leverage and it goes up 5%, your profits will be 10%, and if it falls 5%, you lose 10%.

Advantages and Disadvantages of Using Leverage in Forex Trading


  • It Boosts Forex Trading Profits: With leverage, beginner and professional traders alike can increase their returns by using reasonable leverages. For example, if you only have $1000 in your trading account, you can take advantage of 1:50 leverage forex to trade with $50,000. This is an opportunity for beginner traders to multiply their income to afford to trade using larger accounts.
  • Increases Capital Efficiency: When many people think of leverage, they imagine high profits. But did you know leverage can also boost capital efficiency? An average forex trader usually takes one to two months to make consistent profits using personal funds. Luckily, leverage allows the same traders to make huge profits in the shortest time possible. It also allows traders to diversify and minimize risks so long as they use the correct leverage.
  • Low Capital Required: Unlike prop firms that fund your account, forex brokerage accounts require a specific entry fee. The good news is that the entry fee will be low when you use leverage. The minimum amount required to open a position on the most traded currencies is 100,000. Since not everybody can afford to purchase 100,000 currency units, leverage comes in to aid those traders with very low investment capital. This means even if you have $50 or $100, you can still open a position in the forex market.
  • Convenience and Security: Leverage offered by brokers is convenient compared to borrowing money from the bank. Again, you can open a position at any time on the forex market, even if you have a low starting capital. Aside from that, using leverage services, which guarantee zero balance in times of liquidation, can help prevent further losses and avoid instances of margin calls.

1:1 Forex Leverage Ratio

According to experts, low leverage can allow you to minimize risk and get reasonable returns depending on what you deposited. This makes the 1:1 ratio the best leverage to use in forex, especially for beginners who want to start with large capital. However, if you use this leverage, you are risking 1% for every trading position you open.

1:50 Forex Leverage Ratio

Many traders consider a 1 50 leverage ratio risky, but it is actually conservative compared to other leverage ratios. When you choose to trade with a 1:50 leverage ratio, you can open 50 different positions and risk 0.02% for every position you open. If you deposit $500 in your account and choose this leverage, it means that you can trade up to $25,000.

1: 100 Forex Leverage Ratio

With this ratio, you can control up to $100,000 with a deposit of $1000. This money can allow you to open a maximum of 100 trading positions.

1:400 Forex Leverage Ratio

1:400 leverage allows you to trade as much as $400 for every 1 dollar you deposit. You will find many trading accounts with a minimum lot offering this leverage, and with good risk management skills, you can gain huge profits. However, you should be very careful with brokerage accounts that offer this huge leverage on small accounts. 1:400 leverage comes with high risk, and your account can be automatically wiped out, especially if you deposit a small amount like $500.

Apart from the leverage ratios mentioned above, there are other ratios you can use. The table below should help you understand how different forex leverages work when you start with a deposit of $1000;

Best Leverage for forex (1)

What’s the Best Leverage for $100

Many new traders usually prefer to start with $100 to see if their trading skills are well developed. Unfortunately, around 90% of forex traders lose money within the first few days of trading. This is because of poor risk management skills and sometimes the leverage in use. Many professional traders say that the best leverage for $100 is 1:100. This means that your broker will offer $100 for every $100, meaning you can trade up to $100,000.

However, this does not mean that with a 1:100 leverage ratio, you will not be exposed to risk. You must apply the best risk management skills to avoid blowing your account.

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Frequently Asked Questions About Best Forex Leverage for Beginners

  • Is it necessary to use leverage when trading?

    It is not necessarily that you use leverage. You can use your funds to open trading positions and still earn money. Alternatively, you can trade for prop firms like Audacity Capital and have your account funded.

  • Does leverage allow traders to earn more profit?

    Yes, leverage improves account efficiency, allowing you to make a good profit in the shortest time.

  • How can I avoid losing money while using leverage?

    The only way to avoid losing your deposit is to use risk management skills while using leverage.

Best Leverage for forex (2)
Federica D’Ambrosio

Senior Trader and CFO

Federica D’Ambrosio is a Senior Trader and CFO at Audacity Capital. She graduated in Finance from Luiss University enhancing her knowledge on global markets completing a Master of Science at Fordham university in New York.

Guides About Forex for Beginners

Forex Trading for Beginners
Best Leverage for forex (2024)


Best Leverage for forex? ›

If you are new to Forex, the ideal start would be to use 1:100 leverage and 1,000 USD balance. So, the best leverage for a beginner is definitely not higher than the ratio from 1 to 100.

Is 1/500 leverage good for a beginner? ›

Some may even offer leverage as high as 1:500. While this may seem enticing, it is not recommended for beginner traders. High leverage can lead to significant losses and should only be used by experienced traders who have a thorough understanding of the markets and proper risk management strategies.

Is 1/1000 leverage good for beginners? ›

A leverage ratio of 1:1000 provides the highest level of amplification, allowing you to control positions that are 1000 times larger than your capital. This level of leverage carries significant risks and is generally not recommended for beginners.

Is 1 400 leverage good in forex? ›

1:400 Forex Leverage Ratio

However, you should be very careful with brokerage accounts that offer this huge leverage on small accounts. 1:400 leverage comes with high risk, and your account can be automatically wiped out, especially if you deposit a small amount like $500.

Is 1/200 leverage good? ›

In my opinion , 1:200 leverage is good for a newbie. Because at these leverage there will be a low risk and average profit that a newbie will be interested to trade in Forex market as well as invest. When a newbie invest in Forex market and have not enough knowledge about leverage , they take high risk .

How risky is 1 500 leverage? ›

Making Sense of 1:500 Leverage: A Comprehensive Overview

It comes with significant risks, such as increased potential losses, margin calls, and forced liquidations. However, it also offers benefits, such as increased potential profits, reduced margin requirements, and access to larger markets.

What leverage is good for $10? ›

Here's a general guideline for determining optimal leverage based on account size: Account Size: $10 - $50 Recommended Leverage: 1:100 or lower. Account Size: $100 - $200 Recommended Leverage: 1:200 or lower. Account Size: $200+ Recommended Leverage: 1:300 - 1:500 (for experienced traders)

How much leverage for $100 dollars? ›

Leverage is a financial tool that allows you to control a larger position with a smaller initial investment. This is achieved by borrowing money from your broker to margin your trade. For example, with a leverage ratio of 1:100, you can control a $10,000 position with only $100 in your account.

What is the safest leverage in forex? ›

Best leverage in forex trading depends on the capital owned by the trader. It is agreed that 1:100 to 1:200 is the best forex leverage ratio. Leverage of 1:100 means that with $500 in the account, the trader has $50,000 of credit funds provided by the broker to open trades.

How much can you make with $1000 in forex? ›

First, however, let's assume you started day trading with a capital of $1000. In your strategy, you place a maximum of 15 trades a day (too many), lose 5 and win 10. You are looking at a total of 60 pips per day. As mentioned, you make roughly $20 a day.

Is 1 30 leverage enough for forex? ›

For instance, traders who have limited capital and are just starting may find it difficult to trade with 1:30 leverage as they would need a substantial amount of margin to open trades. In contrast, 1:500 leverage may allow them to take larger positions with a lower amount of capital.

Can I trade 1 to 1 leverage? ›

Limited Risk Exposure: With 1:1 leverage, traders are shielded from the extreme risk of large losses that can result from higher leverage ratios. Since there are no borrowed funds at play, potential losses are confined to the trader's initial capital.

How many lots can I trade with $10,000? ›

Therefore, with a $10,000 account and a 3% maximum risk per trade, you should leverage only up to 30 mini lots even though you may have the ability to trade more.

What leverage should a beginner use? ›

As a new trader, you should consider limiting your leverage to a maximum of 10:1. Or to be really safe, 1:1. Trading with too high a leverage ratio is one of the most common errors made by new forex traders. Until you become more experienced, we strongly recommend that you trade with a lower ratio.

Is 1/2000 leverage safe? ›

Traders can enjoy maximum leverage of 1:2000, ideal for highly speculative trading. However, FXTM does not provide negative balance protection as a safety precaution against the risks of high market exposure. These risks are, nevertheless, mitigated by the relatively narrow margin call and stop-out levels.

What is the best leverage for a $20 account? ›

Generally, it is recommended that traders with small accounts, such as less than $20, use lower leverage to manage their risk. A good rule of thumb is to use leverage of no more than 10:1, or even lower, to help minimize potential losses.

How much leverage should a beginner use? ›

This would mean you have 100,000 units to trade with, but you will have magnified your chances of losing money. Therefore, the best leverage for a beginner is 1:10, or if you want to be safer, choose a leverage of 1:1, depending on the amount you are starting with.

Which leverage is better, 1/100 or 1/500? ›

With 1:100 leverage, traders can control a position that is 100 times their actual investment, while 1:500 leverage amplifies this control to 500 times the investment. The financial repercussions include greater potential profits but also increased risks and potential losses, especially if the market moves unfavorably.

What is the best leverage for a $100 account? ›

The best leverage for $100 forex account is 1:100.

Many professional traders also recommend this leverage ratio. If your leverage is 1:100, it means for every $1, your broker gives you $100. So if your trading balance is $100, you can trade $10,000 ($100*100).

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