Listen to the Article: Unlimited Leverage? The Untold Facts About Ultra-High Leverages in the FX Market

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In the forex market, brokers offer different leverages for traders, and regulators in different countries limit leverage differently, so brokers offer various leverage ratios. Common ones are 10x, 20x, 50x, 100x, 200x, 300x, 400x, 500x, and so on. Some brokers, such as Exness, even offer 1:1000 to "unlimited leverage", which astonishes people who are new to high leverage trading.

Today, let's take a look at some untold facts behind ultra-high leverage trading in the forex market, and whether Exness' unlimited leverage is really as it claims.

Leverage Offered vs. Leverage Used Are Two Things

Forex margin trading is popular worldwide, and one of its main reasons that makes it so appealing is that it can use leverage to amplify returns. However, the ratio is not fixed, and brokers may adjust the ratio according to market changes and their own interests, to reduce risk.

Some people may have some misconceptions about high leverage trading. We can use the ratio offered by brokers and the leverage ratio actually used by traders as an example to illustrate. Generally speaking, if the ratio offered by the broker is 1:100, then the trader only needs to pay 1% of the total transaction amount as margin, for example, if the trader wants to trade one standard lot, the total transaction amount is US$100,000, then the margin is US$1,000 - this is the minimum deposit requirement for this transaction.

However, the leverage ratio that traders actually get may not be like this. First of all, most people will not use all their funds as margin. That is to say, few people will use all the money in their account to trade. For example, like the case above, the trader deposited a total of US$1,000, but he only traded half a lot, so the actual margin required is US$500, then his actual leverage is 50,000 divided by 1,000, which is 50x.

High Leverage Has An Impact on Brokers

So, in forex trading, brokers' leverage ratios are actually just the maximum amount that can be traded. Therefore, the leverage ratio and the risk borne by the trader are not completely proportional. So in the beginning we said,  when Exness offers 1:1000 leverage and even "unlimited leverage", in fact, the final choice is still up to the trader.

This is also why many forex brokers, especially retail brokers, are more willing to offer high leverage. In their view, "gamble big" has always been a major advantage of forex trading. But not all traders have a strict risk control awareness, so if all brokers keep up and offer high leverage, then the proportion of users who make risk misjudgments under the temptation of high profit returns will be higher too, and honestly most of the brokers' "scam" accusations come from users who have suffered heavy losses in high leverage trading (of course, there are cases where unscrupulous brokers manipulate trades through software).

All in all, overly high leverage ratio may cause traders to make wrong judgments about risk, increase the level of actual leverage, and the level of actual leverage is the real "amplifier of profit and loss". Trading under high actual leverage, a small price fluctuation may make traders lose everything. This is why the regulators in countries or regions such as the United States, Japan, and Europe have restrictions on the maximum leverage ratio.

Is the Exness "Unlimited Leverage" A Real Thing?

As we just said, the high leverage offered by regulated brokers does not necessarily mean high risk. Risk actually has nothing to do with leverage itself, and the decisive factor is actually the trading strategy and risk control. Then, let's go back and take a look at Exness' unlimited leverage.

According to their website, "unlimited leverage is the highest available leverage setting for all Exness account types. It is not available by default as it is recommended for experienced traders." To activate it, a user has to meet at least two prerequisites. First, the user's account must have funds of less than USD 1,000; and second, the user must have closed at least 10 orders with a minimum value of 5 lots.

It can be seen that Exness, as a leading online broker in the industry, does indeed try to limit the users who use this unlimited leverage to those with high risk control awareness as much as possible through the constraints of conditions. But at the same time, precisely because of the behavior of providing ultra-high leverage, Exness' licenses are very limited, and this in turn is a big disadvantage for traders with strong risk awareness.

Final Thoughts

It is not a bad thing for brokers to offer high leverage. It gives traders with insufficient funds the opportunity to participate in the market. As a means of attracting users, there is no problem. The actual risk of the account still depends on the trader's own risk control awareness. But like traders, high leverage is also a double-edged sword for brokers, amplifying profits and losses at the same time.

Therefore, is such a product as "unlimited leverage" really necessary for a broker? Is it just a helpless means of attracting customers when the broker cannot obtain licenses in regions where forex trading regulation is very mature, such as Europe and North America?

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