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Leverage Caps and what it means for Forex Traders

As a trader, keeping track of all the final regulations that keep cropping up in the financial market is a hard task. But on the plus side, the majority of financial regulations are introduced to protect the retail clients. Cyprus Securities and Exchange Commission (CySEC)—the watchdog of the Cyprus Financial market—has adopted the leverage system temporarily introduced by the European Securities and Markets Authority (ESMA) in August 2018. Though the ‘ESMA measures’ elapsed in 2019, CySEC has permanently included them in its regulations.

Initially, the Cypriot regulator was planning on different leverage levels for various retail clients but in the end, they adopted the same leverage caps for all retail investors. According to the new regulations, the leverage is now capped at 30:1 for major currency pairs and 2:1 on cryptocurrencies. The leverage limit implemented by the CySEC is based on the volatility of the underlying assets. With that in mind, brokers like Trust Capital TC have defined their leverage offerings to deliver the finest trading environment to their clients.

Retail investors won’t be able to lose more money than they have deposited in their accounts, as they will be protected from a negative balance.

Leverage in forex trading often can be a double-edged sword, it can either lead to great gains or extreme losses. Both the profits and losses are highly magnified. Hence, the leverage caps provide traders the much-needed protection from these extremities. With the new regulation in place, there are restrictions on the risks retail clients can take while trading.

Risk Warning:

This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. Trust Capital TC Ltd does not take into account your personal investment objectives or financial situation. Trust Capital TC Ltd makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by an employee of Trust Capital TC Ltd, a third party or otherwise.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.33% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Trust Capital TC does not offer Contracts for Difference to residents of certain jurisdictions including the USA, Iran, and North Korea. Please consider our Risk Disclosure.