For specific trading instruments, XM enables you to use leverage, which increases the size of your position in the market and thereby provides more opportunity for gain or loss on an individual trade.
XM broker leverage can range from 1:1 to 1000:1, but the amount is also a function of your account designation, your legal residence, your product selection, and the equity balance level in your account.
For the Micro and Standard accounts at XM, leverage can range from 1:1 to 1000:1, but the higher ranges may be restricted by local law or by the amount of margin your account balance can support. The firm’s Zero account is for professionals with a balance of over $100,000, and the rules also vary for these larger positions. Leverage may also be capped for various tradable assets, as reflected on the XM website.
XM allows you to change the level of leverage that will be applied to your trades, as long as the size of your position and your account balance will not exceed risk limits maintained by the broker. Changing your standard level of leverage is easy. Go to the top of any page on the XM website and click on the ‘Member Login’ button.
From the options listed, choose ‘Change Leverage’. A table of possibilities will be presented. Choose the level you wish to use and hit the ‘Request’ button. The change process is not an automated one, so XM staff must review your request. You will be sent a confirmation note of what your new level of leverage will be going forward. Please be aware that there may still be regulatory limits that apply to specific asset choices.
Regulators have become increasingly concerned that forex traders do not understand the risk implications of trading with highly leveraged products. The FCA, ESMA and CySEC have seriously curtailed the level of leverage that brokers can offer to residents in these locations. A simple example will illustrate the risks that accompany the use of leverage.
Assume that you buy a $2,000 position in the EUR/USD currency pair at 50:1 leverage. Your position in the market will be $100,000 – i.e., 50 x $2,000. If the pair goes up 2%, your gain could be $2,000, a 100% return on your investment. If the market went in the opposite direction, you could lose an equal amount. There will also be the impact of Bid/Ask spreads on your gain or loss, and margin calculations might also limit the size of your position in the market.
XM group leverage can vary depending upon regulatory limits set regionally. For example, the FCA in the UK and CySEC in the EU limit leverage to traders from their parts of the world as follows:
These leverage level limits are considerably different from what may be advertised, but high trader losing rates have prompted many regulators to protect traders in their regions by enforcing regulations with much lower limits. Newcomers to forex trading are often counseled to limit their use of leverage until they become familiar with the risks involved and how to use it to their advantage.
Margin considerations may also limit your use of leverage by putting a cap on the size of your position, based on the equity level in your account and the amount of risk that XM is prepared to support on your behalf.
XM is a leading and highly rated global forex and CFD broker headquartered in Cyprus. It is heavily regulated and advertises leverage from 1:1 to 1000:1, but the levels may be limited by local regulatory bodies, by the acceptable margin risk level that applies to your account, or by the actual asset you choose to trade.