Polish authorities Allows Leverage As High As 1100

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Polish Authorities Launch New Effort to Block Unauthorized Forex Brokers

Internet providers will play a key role in restricting access to unauthorized sites.

Poland is taking some proactive measures to limit access to the market for unauthorized forex brokers. Marek Chrzanowski, the Chairman of the Polish Financial Supervision Commission, shared with the ministry of finance a draft of the Act on Financial Market Supervision, which was prepared by the Polish Financial Supervision Authority (KNF).

The regulator has identified increasing risks for retail clients in Poland, stemming from companies that are not regulated in the country. Such providers have been ruthlessly targeting clients in the country without adhering to ethical and regulatory standards.

The KNF will be granted the power to prevent the provision of financial services by such companies. The watchdog will be empowered to regularly update and maintain a list of unregulated companies that are targeting Polish clients and ban their access to the market via internet service providers.

Tackling an old problem

A number of countries in and outside of the European Union have been targeted by unauthorized brokers for years. Such companies use aggressive hot sales tactics and numerous schemes to attract clients.

The KNF appears to be the first to actively engage in filtering traffic from such unregulated websites to protect retail clients in the country.

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After the completion of an inspection entitled “Protection of unprofessional participants in the foreign exchange market”, the financial supervision authorities in Poland identified significant gaps in the existing framework. A couple of years ago, the KNF was the first European regulator to officially introduce a cap on leverage, at 1:100.

Since then, the main problem for retail clients in the country have been entities that are not regulated by nor based in Poland. Such companies are typically based offshore and very difficult to trace.

Criminalization and fines

Unregulated brokers will be identified by the KNF and their names will be publicized in a public alert list. The list will include internet domain names that are used by the unauthorized entities to provide financial services. The KNF will then proceed to enter the domain name into the restricted domain register.

Subsequently, internet service providers in Poland will block access to the domains. The country has already been using similar measures to ban betting and gambling sites.

Current laws allow Polish authorities to fine companies that operate unlawfully up to PLN 5 million ($1.26 million). The KNF is proposing to double the maximum fine and criminalize such activities.

How Leverage Works in the Forex Market

The concept of leverage is used by both investors and companies. Investors use leverage to significantly increase the returns that can be provided on an investment. They lever their investments by using various instruments that include options, futures and margin accounts. Companies can use leverage to finance their assets. In other words, instead of issuing stock to raise capital, companies can use debt financing to invest in business operations in an attempt to increase shareholder value.

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Using Leverage in Forex

In forex, investors use leverage to profit from the fluctuations in exchange rates between two different countries. The leverage that is achievable in the forex market is one of the highest that investors can obtain. Leverage is activated through a loan that is provided to an investor by the broker that is handling the investor’s or trader’s forex account.

When a trader decides to trade in the forex market, he or she must first open a margin account with a forex broker. Usually, the amount of leverage provided is either 50:1, 100:1 or 200:1, depending on the broker and the size of the position that the investor is trading. What does this mean? A 50:1 leverage ratio means that the minimum margin requirement for the trader is 1/50 = 2%. A 100:1 ratio means that the trader is required to have at least 1/100 = 1% of the total value of trade available as cash in the trading account, and so on. Standard trading is done on 100,000 units of currency, so for a trade of this size, the leverage provided is usually 50:1 or 100:1. Leverage of 200:1 is usually used for positions of $50,000 or less.

To trade $100,000 of currency, with a margin of 1%, an investor will only have to deposit $1,000 into her or his margin account. The leverage provided on a trade like this is 100:1. Leverage of this size is significantly larger than the 2:1 leverage commonly provided on equities and the 15:1 leverage provided in the futures market. Although 100:1 leverage may seem extremely risky, the risk is significantly less when you consider that currency prices usually change by less than 1% during intraday trading (trading within one day). If currencies fluctuated as much as equities, brokers would not be able to provide as much leverage.

How Leverage Can Backfire

Although the ability to earn significant profits by using leverage is substantial, leverage can also work against investors. For example, if the currency underlying one of your trades moves in the opposite direction of what you believed would happen, leverage will greatly amplify the potential losses. To avoid a catastrophe, forex traders usually implement a strict trading style that includes the use of stop orders and limit orders designed to control potential losses.

High Leverage Forex Brokers

What is Forex Broker leverage?

The Forex trading indeed is known for its leveraged trading possibility, which means that the trader is able to use the leverage strategy or “borrowed” capital as its funding source. Simply, Leverage tool opening opportunities to your trading account operate larger volume and trade currency pairs through an initially small balance.

This method expands trading base and multiplying the initial trading account balance timely, which in return leads to potential bigger returns, yet magnifies higher risks of losses as well.

The leverage level usually expressed as a ratio, means the trader should have at least a particular percentage of the total available volume (e.g. leverage 1:100 requires 1% of volume).

Is Forex a gamble?

Indeed, you may find brokers that allow you to trade with only 5$ at the very beginning which often seems like gambling or a pure scam. However, it is all about a broker you trade with if you would choose a regulated serious broker from a reputable jurisdiction which obliges to legislation laws and constantly overseen it is considered a safe investment.

Which Forex Brokers are safest to trade with?

Along with leverage great possibility you definitely should stick to a smart choice of the broker as well, since many brokers around are simply scams with tempting income opportunities. So safest and the best Forex Brokers are the ones that are regulated.

Besides numerous obligations and terms regulated broker follows, authorities also restrict leverage as well, which vary from the jurisdiction to another. Read more about Regulated Forex Brokers by the link.

Indeed, leverage involves the high potential to lose money easier as well, which caused reputable jurisdictions and respected authorities like US FMA and CFTC along with recent update from European ESMA take necessary measures and limit offered and allowed levels of leverage. Yet, some authorities still offer high ratios

  • The current maximum for trading Financial Market in the US regulated broker may offer leverage of 1:50, while the European broker under ESMA allowed using only 1:30
  • Australian regulation ASIC, which is highly respected for its regulatory guidelines and maintenance of fair, transparent run of Australian Brokers did not restrict requirement to lower leverage. Thus, Forex Brokers with ASIC License may offer leverage up to 1:400 or even 1:500.

What leverage is best for newbie?

If you are a newbie or a very beginner in trading, of course, you should first learn deeply how to operate trading safely and use leverage smartly. It is recommended to choose among Forex Brokers suitable for beginners since those brokers offering educational materials and support you at first steps.

As for the leverage itself, it is best not to use the highest leverage ratios at the very beginning, but to balance it with a good strategy, also you may check out Micro Lot trading, which requires smaller amounts and is good for practice. Do not strive for a million income at your first steps, but better deploy a good strategy and generate wealth step by step.

How to choose Forex broker?

As we already see, due to European, US regulations and other restrictions implemented on the leverage it caused many worldwide traders of smaller sizes mainly to search for alternative opportunities. As the majority of international traders are in use to see Brokers with High Leverage levels like 1:400, 1:500 or even more.

Of course, the choice is yours, but verify with the broker first, as many reputable Brokers holding several licenses and run entities in various jurisdictions, so still able to offer higher ratios for leverage by a simple register of account under certain regulation.

In addition, the Forex Broker Review list below designed for you to assist in the selection and defines only Serious regulated brokers that offer high leverage ratios. So see below detailed reviews along with professional research materials including trading conditions, spreads, traders’ comments and more.

What is the most important thing to keep in mind in Forex trading?

What we can conclude is that while the majority of companies recently use low leverage ratios, it is solely a choice of a trader under which entity to trade and either use Brokers with high leverage ratios or not. You should keep in mind involved high risks in Forex trading, especially when you use leverage.

From our side, it is important to deliver a message about leverage risks and courage our readers or traders to learn how to use leverage smartly in order to perform better trading. And, of course, do not be allured by the highest ratios of leverage alike 1:1000, it should actually alert any trader, as such levels are extremely risky and are used only by the brokers that are either offshore or nor regulated at all, which should be avoided by any cost.

High Leverage – Low Margin

We provide excellent margin trading conditions for all types of accounts. You can enjoy the maximum leverage of 1/1000 both on our Standard accounts and ECN accounts.

You can begin to trade with a leverage ratio of 1:1, though we do not recommend it. A leverage ratio is just a credit ratio. A margin call may occur quickly even though you have sufficient funds on your account.

Your account has a leverage ratio of 1:100. If you open a position for 100,000 EUR/USD at the rate of 1.40, your margin will be 100,000 x 1.40 / 100 = 1400.

If you have made a trading error and the price starts to go against you, your equity will start to approach 0 and your position will be closed when your equity reaches the following amount:

X = Stop-Out level x Margin = 0.4 (40%) x 1400 = 560

That is, the system will automatically close your positions when your equity reaches $560 in this case, given your leverage ratio of 1:100.

If you set a lower leverage ratio on your account, such as 1:10, then the margin will be 140,000 / 10 = 14,000, and your positions will be closed when the equity reaches the following amount:

X = Stop-Out Level x Margin = 0.4 (40%) x 14000 = 5600

As you can see, the lower the ratio, the higher the equity amount at which your positions will be automatically closed. That means it is better to choose a higher leverage ratio, but not trade at the maximum level or open positions of large volumes. This will greatly reduce your trading risks.

We do not recommend using a real leverage ratio greater than 1:20 in trading, but the final decision is up to you. Our system allows you to have a leverage ratio up to 1:1000. The margin will be only 0.1% of the volume of opened positions.

Please keep in mind that the use of a high leverage ratio leads to very high risks. Remember that the more you can earn, the greater the risk of losing your money. Be reasonable and pay attention!

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