AvaTrade leverage allows traders to control a position size at a fraction of capital, but traders should understand leverage and its relationship to risk management before trading leveraged accounts. We will cover all you need to know to prepare you for AvaTrade leveraged trading and its potential benefits.
What Is AvaTrade’s Leverage
The AvaTrade leverage depends on the geographic location of traders and the asset type. The maximum is 1:400 for Forex traders outside the EU, while ESMA regulations force AvaTrade to lower it to 1:30 for EU-based retail traders. Professional traders within the EU also get a maximum leverage of 1:400.
AvaTrade leverage allows traders to borrow capital from AvaTrade to control more substantial trade sizes. While it can significantly boost profits, it can also magnify losses. Traders must manage risk via proactive risk management and understand that higher leverage will decrease the price action level their trade can move against them before they must liquidate their position.
Therefore, if a trader has a 4% risk tolerance on a $5,000 portfolio, the maximum loss per trade would be $200, regardless of whether leverage is 1:1 or 1:3000. What changes is how fast a stop-loss level triggers, meaning with lower leverage a trade can stay open for longer as a loss-making position. However, this can create a new set of issues in itself, primarily causing the trader to losetime, which can be more valuable than capital. Slippage is also a concern, where the price moves so fast that the exit order is executed at a significantly worse price. When leverage is used, slippage can be a major worry.
AvaTrade Leverage by Asset Type
Besides the geographic location of traders, AvaTrade leverage depends on the asset type, where liquidity is a major factor.
Here is a breakdown of AvaTrade leverage by asset type:
- Forex - 1:400
- Commodities - 1:200
- Indices - 1:200
- Bonds - 1:100
- Cryptocurrencies - 1:25
- Equity CFDs - 1:20
- ETFs - 1:20
Please note:
- EU-based retail traders receive a maximum AvaTrade leverage of 1:30.
- Not all assets per sector may qualify for maximum leverage, as less liquid assets have higher margin requirements and, therefore, lower leverage.
How Do You Change Leverage in AvaTrade?
Traders can adjust the AvaTrade leverage by selecting from the predefined levels in each order ticket. AvaTrade does not allow custom leverage settings, but the choice of predefined levels provides more flexibility than most brokers, which operate with fixed settings without the option to adjust leverage based on each trade.
AvaProtect - What Is It and How Does It Work?
AvaProtect is a fee-based insurance program for beginners that allows traders to recover trading losses, ideal for new traders using AvaTrade leverage. It is available with the proprietary WebTrader and the mobile app AvaTradeGO.
Here Is How to Use AvaProtect
- Select an asset (AvaProtect only applies to Forex, gold, and silver positions)
- Click the AvaProtect icon.
- Choose your duration (AvaProtect offers 1-hour, 3-hours, 6-hours, 12-hours, 1-day, and 2-days protection periods)
- Note the AvaProtect fee and expiry time.
- Place the trade.
Please note: AvaTrade reimburses traders for losses during the protection period.
AvaTrade Leverage – Pros & Cons
Traders should consider the pros and cons of AvaTrade leverage before depositing funds to manage leveraged portfolios.
The Pros of AvaTrade Leverage
- Increased capital to manage portfolios.
- Smaller portfolios required to achieve diversification.
- Greater profit potential
- Interest-free loan if traders close the position intra-day (before 17:00 EST, at which point swap rates apply)
- Access to an essential Forex trading tool
- Negative balance protection. ensuring traders cannot lose more than their deposit.
- Automatic margin calls and stop-out levels.
The Cons of AvaTrade Leverage
- It can magnify losses.
- Many traders lack understanding of leverage and risk management.
- There is a false perception of leverage.
- Improper usage can lead to substantial losses.
- Significant slippage can be very dangerous if it occurs with a highly leveraged trade. There is a similar concern with leaving leveraged trades open over a weekend.
Bottom Line
AvaTrade leverage allows traders to turn smaller deposits into sizeable trading profits, but it equally magnifies trading losses. Therefore, traders must understand the relationship between risk management and AvaTrade leverage.
In addition, we recommend that you read our in-depth AvaTrade up-to-date broker review. When the account equity level drops below 50% of the margin, AvaTrade will issue a margin call to retail traders. Professional and non-EU traders receive one at 10%. When the account equity falls below 50% of the used margin, AvaTrade will automatically close positions to bring it above 50%. The same applies to professional and non-EU traders at 10%.FAQs
What level is a margin call in AvaTrade?
