CFD leverage lets you take a market position worth more than the money required to open it. Margin is that opening requirement, not the maximum amount you can lose. Confusing the two can turn an apparently modest trade into a large account loss.
This guide focuses on UK retail accounts. It separates the three controls that matter: the exposure you choose, the broker’s margin close-out process and negative balance protection. For the broader product mechanics, see our introduction to CFD trading.
How CFD leverage and margin work
A CFD’s notional value is the market exposure represented by the contract. If you open £10,000 of exposure with a 5% margin requirement, you must provide £500 in margin. The exposure is 20 times the required margin, commonly written as 20:1 leverage.
Required margin = notional exposure × margin rate
Exposure relative to required margin = 1 ÷ margin rate
For a straightforward £10,000 long position, a 1% price rise produces approximately £100 of gross profit. A 1% fall produces approximately £100 of gross loss. That £100 equals 20% of the £500 margin, before charges and assuming no currency conversion effects.
The profit or loss follows the full exposure, not the margin deposit. Margin provides collateral for the position; it is not a purchase price, a fee or a predefined loss allowance.
Available leverage is not the same as account leverage
Suppose the account contains £2,000 and you open that £10,000 position. Although the contract requires only £500 margin, your exposure relative to account equity is 5:1, not 20:1.
Gross account leverage = total absolute notional exposure ÷ account equity
This distinction matters because you do not have to use all the exposure a broker permits. With £2,000 equity, choosing £4,000 rather than £10,000 exposure reduces gross account leverage from 5:1 to 2:1. In this simplified example, a 1% adverse move then costs £40 rather than £100.
Gross exposure is a useful starting point, not a complete risk measure. It adds long and short positions without recognising genuine offsets, and it does not account for differences in volatility.
UK retail CFD leverage limits
The FCA’s retail CFD margin rules set minimum opening margin by underlying asset. The corresponding leverage ceilings are summarised below.
| Underlying asset category | Minimum opening margin | Corresponding leverage ceiling |
|---|---|---|
| Major currency pairs and qualifying sovereign debt | 3.33% | Approximately 30:1 |
| Major stock indices, minor currency pairs and gold | 5% | 20:1 |
| Minor stock indices and commodities other than gold | 10% | 10:1 |
| Individual shares and other assets covered by the residual category | 20% | 5:1 |
These are regulatory categories, not labels that a broker can choose freely. The 30:1 figure also does not mean every instrument, account or position size must receive that rate. A provider can require more margin.
Check the actual order ticket before trading. At 20% margin, £10,000 of share CFD exposure requires £2,000. At 25%, the same exposure requires £2,500. Neither amount tells you where to place an exit or how much loss your finances can absorb.
Cryptoasset CFDs should not be added to this table as a UK retail “2:1” option. The FCA prohibition on retail cryptoasset derivatives prevents firms from marketing, distributing or selling covered cryptoasset derivatives to retail clients in or from the UK. An overseas platform displaying them does not establish that UK retail protections apply.
Balance, equity and free margin
The account balance alone does not show how much capacity remains. Open losses can reduce equity well before a position closes and those losses enter the balance.
- Balance
- The booked account amount after deposits, withdrawals, realised trading results and posted charges.
- Equity
- Balance adjusted for unrealised profit or loss and any applicable account adjustments.
- Used margin
- The amount allocated to support open positions under the provider’s margin calculation.
- Free margin
- Generally, equity minus used margin. Check the platform’s definitions.
- Margin level
- Commonly expressed as equity divided by used margin, multiplied by 100.
Consider an account with a £2,000 balance, £300 of unrealised losses and £500 used margin. Ignoring other adjustments, equity is £1,700, free margin is £1,200 and the margin level is 340%.
Costs also affect the cushion. Spreads, commissions and financing can reduce equity even when the underlying price barely changes. Our guide to CFD costs and overnight financing covers those charges separately.
Free margin is not a recommendation to open another trade. It is an account calculation. Treating every available pound as unused trading potential leaves less room for losses on positions already open.
How the 50% margin close-out rule works
UK retail CFD accounts have an account-level close-out safeguard. The FCA’s permanent CFD restrictions require close-out when account equity falls below 50% of the relevant margin requirement, with execution as soon as market conditions allow.
The threshold is not 50% of your original deposit. It is measured against the relevant margin requirement for open positions.
For a simplified example, assume an account starts with £2,000 equity and has one position requiring £1,000 margin. Assume that requirement stays constant, there are no charges and the broker does not close earlier.
The 50% threshold is £500. Equity reaches that level after £1,500 of losses: 75% of the starting account, not 50%. This is why a regulatory close-out threshold makes a poor personal risk budget.
Why a margin warning is not extra trading time
Do not build a plan around receiving an alert and then transferring money. A deposit may not arrive before prices move again. Check the provider’s warning levels, contractual closure rights and treatment of multiple positions before funding the account.
Closing one position releases its margin but also realises its profit or loss. The remaining account calculation changes. Do not assume the broker will close the position you would have chosen first.
A threshold also does not guarantee an execution price. If prices jump across it, the next available execution may leave substantially less equity than the threshold suggested. The separate guide to order execution and slippage examines how fills can differ from expected prices.
What negative balance protection covers
For covered UK retail accounts, negative balance protection caps liability from the relevant speculative products at the funds dedicated to them in the account. The FCA’s negative balance protection provisions in PS19/18 distinguish those funds from assets held for other purposes.
This is account protection, not protection for each trade’s margin. If you hold £3,000 in a CFD account and commit £500 as margin, the remaining £2,500 is not sheltered from trading losses.
Consider a simplified gap scenario: an account holds £1,000, but closing its positions produces £1,400 of losses. Where the protection applies, the client loses the £1,000 account funds but does not owe the additional £400 from those covered trades.
It does not refund the £1,000, guarantee a stop price or preserve accumulated profits. Funds include cash and unrealised net profits allocated to the covered trading activity. Depositing more money exposes that additional money too; the first deposit is not a lifetime loss ceiling.
It is separate from broker failure protection
Negative balance protection addresses liability after trading losses. A broker’s failure raises a different question: what happens to money or assets the firm should be holding for you?
Do not treat a negative balance promise as an answer to that question. Client money arrangements and potential compensation require separate checks, covered in our guide to client money protection if a broker fails.
Stop orders, close-outs and balance protection serve different purposes
A stop order is part of your trade plan. Margin close-out is an account control. Negative balance protection addresses the liability left after losses. Substituting one for another leaves gaps in the plan.
For example, suppose you intend to exit a £5,000 position after an adverse move of 2%, giving a planned gross loss of £100. That plan should be assessed against account equity and execution risk, not against whether the account could survive until compulsory close-out.
An ordinary stop can execute beyond its trigger during a gap or fast market. Where a guaranteed stop is offered, review its contractual terms, availability and charges rather than assuming every stop carries a price guarantee.
More cash can postpone a margin problem without improving the trade itself. If the exposure stays at £5,000, a 4% adverse move still produces a £200 gross loss whether the account contains £1,000 or £5,000. A larger deposit changes the percentage account loss, not the pounds lost on that position.
Professional status and offshore accounts change the checks
Do not assume UK retail safeguards follow a brand name. Professional client categorisation or an account with an overseas group company can change the protections available. The FCA warning about surrendering CFD retail protections addresses pressure to opt up and redirection to offshore firms without equivalent safeguards.
Before accepting higher exposure limits, identify the contracting legal entity, jurisdiction, client category and written negative balance terms. A marketing statement about being “regulated” does not answer all four questions.
Do not confuse qualifying for an account category with being able to afford its risks. A higher ceiling changes trading capacity, not the quality of a strategy.
Set position risk before checking available margin
A more disciplined sequence starts with the loss you are prepared to take, then works backwards to exposure. Margin is a feasibility check after that calculation, not the starting point.
Suppose an illustrative £5,000 account allocates £50 to the planned price loss on a trade. If the intended exit is 2% away, the corresponding notional exposure is:
£50 ÷ 0.02 = £2,500
At a 5% margin rate, that position requires £125 margin. At 20%, it requires £500. The planned price loss remains £50 in both cases, before costs, currency effects and slippage. Changing the margin rate does not change the exposure already selected.
This example is not a recommended risk percentage. The fuller process belongs in a position sizing and trading risk budget, including the possibility that actual losses exceed planned exits.
Before placing an order, check:
- The full notional exposure and loss from a plausible adverse move.
- The margin requirement and remaining equity cushion after opening.
- The effect of other positions losing at the same time.
- The consequences of a gap beyond the intended exit.
- The legal entity, client category and applicable protection terms.
Margin answers whether the account can support a position under the broker’s rules. It does not answer whether you should take it. Keep those decisions separate: choose the exposure you can afford to lose on, rather than the largest position the order ticket will accept.