The Leverage Ladder, part 1 of 3.
Part 2 covers the professional opt-out that removes these caps; part 3 covers the 50% rule that closes your trades. For the regulatory background, start with ESMA rules explained.
Most Traders Read the Cap as a Restriction. It Is a Rating.
Ask a retail trader in the EEA what their leverage limit is and you will usually get one number back: 30:1. It is the figure brokers advertise, the one that appears in every comparison table, and it is correct — for exactly one category of instrument.
The actual rule is a five-rung ladder. And the ladder is more useful than any single number, because the regulator did not pick those rungs arbitrarily. It ranked instruments by how violently they move, then set the cap so that a retail client cannot open a position large enough for a normal day's volatility to destroy the account. Read it in that direction and the table stops being a list of restrictions and starts being a free, published, official risk rating of the markets you are about to trade.
Here is the ladder, quoted from the regulator's own measures:
| Underlying instrument | Maximum leverage | What the rung is telling you |
|---|---|---|
| Major currency pairs | 30:1 | The calmest liquid market retail clients can access |
| Non-major currency pairs, gold and major equity indices | 20:1 | Roughly half again as jumpy as EUR/USD |
| Commodities other than gold, and non-major equity indices | 10:1 | Gap risk and thin books are normal here |
| Individual equities and other reference values | 5:1 | One company, one earnings call, one headline |
| Cryptocurrencies | 2:1 | Treated as the most hazardous class on the list |
Caps quoted from ESMA's product-intervention notice. ESMA's own measures expired on 31 July 2019 and were replaced by permanent national measures adopted by regulators across the EEA — the content is materially the same, but the rule binding your broker is a national one. Verified at source 8 August 2026.
The Ladder Is a Volatility Ranking in Disguise
Notice what changes as you go down the table. Nothing about the product structure changes at all: every row is a CFD, traded on the same platform, with the same order types and the same broker. The only thing that changes is the underlying.
So the cap is not a judgement about CFDs. It is a judgement about the thing the CFD is written on.
- EUR/USD at 30:1. The major pairs are the deepest, most heavily traded markets on earth. Two large economies, two central banks with published schedules, and enough volume that a single participant rarely moves the price far. A 1% day is a notable day.
- Gold at 20:1. Gold is liquid, but it is a crisis asset. It responds to real yields, the dollar and geopolitics at once, and it can travel several percent while the FX majors barely move.
- Oil at 10:1. Physical commodities carry supply shocks, storage constraints and delivery mechanics. Prices gap on an OPEC headline at a weekend, and the market you reopen into on Monday is not the one you left.
- A single share at 5:1. Diversification is doing no work for you here. One earnings miss, one regulatory ruling, one product recall, and the instrument moves 20% before you have read the first paragraph of the announcement.
- Bitcoin at 2:1. The bottom rung, and the only one on the list where the regulator effectively says you may borrow no more than you already have.
Put crudely: the cap answers the question "how wrong can this market go before breakfast?" The higher the honest answer, the lower the rung.
What the Rungs Mean in Money
Leverage caps are abstract until you turn them into a margin figure. The arithmetic is the same every time — margin required equals notional position size divided by the leverage — but the result changes dramatically as you move down the ladder.
Take a nominal position of EUR 100,000 in each class and read what the cap forces you to put up:
| Instrument class | Cap | Margin on a EUR 100,000 notional position |
|---|---|---|
| Major currency pair | 30:1 | EUR 3,333 |
| Gold or a major index | 20:1 | EUR 5,000 |
| Oil or a non-major index | 10:1 | EUR 10,000 |
| Individual equity | 5:1 | EUR 20,000 |
| Cryptocurrency | 2:1 | EUR 50,000 |
The same headline position size requires fifteen times more capital in crypto than in EUR/USD. That is the entire intervention, expressed in one column.
And there is a second reading of the same table that matters more for survival. Flip it around: with a fixed EUR 5,000 of margin, the cap decides how big a position you are permitted to build, and therefore how much a 1% adverse move costs you. At 30:1 that deposit controls EUR 150,000, and a 1% move against you is EUR 1,500 — 30% of the margin. The percentage loss per 1% move is simply the leverage ratio. That is the number worth internalising, because it is identical on every rung: at maximum permitted leverage, a 1% adverse move costs you the leverage ratio as a percentage of your margin.
Sizing From Risk Instead of From the Cap
Here is the part that changes how the ladder feels in practice. Everything above sizes a position from the margin available. Almost nobody who lasts in this business does it that way round. They start from the loss they are prepared to take and work backwards — and when you do that, the cap usually stops being the binding constraint at all.
The arithmetic is one line. Position size equals the money you are willing to lose divided by the distance to your stop, expressed as a fraction of the price. Risk EUR 100 with a stop half a per cent away and you may hold EUR 20,000 of notional, because half a per cent of EUR 20,000 is EUR 100. Notice that leverage has not appeared anywhere in that calculation. Leverage only tells you what you must post to hold a position you have already sized by other means.
Run the same method down the whole ladder. The stop distances in the table below are illustrative — chosen to show how the arithmetic behaves across instruments of different volatility, not drawn from any dataset, not typical values, and not a recommendation. Substitute whatever distances your own method actually produces.
| Rung | Illustrative stop distance | Notional implied by a EUR 100 risk budget | Margin that notional requires | Is the cap the binding constraint? |
|---|---|---|---|---|
| Major pair, 30:1 | 0.5% | EUR 20,000 | EUR 667 | No |
| Gold or major index, 20:1 | 1% | EUR 10,000 | EUR 500 | No |
| Oil or non-major index, 10:1 | 2% | EUR 5,000 | EUR 500 | No |
| Individual equity, 5:1 | 5% | EUR 2,000 | EUR 400 | No |
| Cryptocurrency, 2:1 | 10% | EUR 1,000 | EUR 500 | No |
Look down the fourth column. The caps in that table span a factor of fifteen, from 30:1 to 2:1 — and the margin actually required lands between EUR 400 and EUR 667 on every single rung. Sizing from risk very nearly cancels the ladder out, and it does so for a reason that is worth sitting with: the rungs already track how far a sensible stop has to sit on each instrument. The regulator's volatility ranking and a competent trader's stop-distance ranking turn out to be the same ranking, arrived at independently.
Which produces the honest conclusion about who the caps are really for. If you size from risk, the cap is a formality you will rarely touch. The cap binds only when position size is chosen by asking "how much am I allowed to open?" — and the trader asking that question is precisely the one the measure was written for. Position sizing and risk management works the method through properly, and leverage and margin from first principles covers the mechanics underneath it.
The Caps Limit Your Entry, Not Your Loss
This is the most common misreading in the whole area, and it is worth being blunt about it.
A leverage cap constrains the size of the position you may open against a given deposit. It does nothing whatsoever to limit how far that position can move against you afterwards. A 30:1 cap on a major pair does not mean your maximum loss is one thirtieth of anything. If the market gaps through your level over a weekend, the cap has already done its only job and is no longer involved.
Two separate rules handle what happens next, and both are covered elsewhere in this series: the 50% margin close-out rule, which forces your broker to start closing positions at a defined point, and negative balance protection, which stops you owing money you never deposited. Neither of them is a leverage cap, and conflating the three is how people end up believing they are far better protected than they are. The full set is laid out in ESMA rules explained.
Three Ways the Ladder Gets Misread
"The cap tells me how much I can lose." It does not, and the rest of the regulatory framework exists precisely because it does not. The cap is a ceiling on the position you may open. The moment the position is open the cap has finished its work, and how far the market travels afterwards is a matter for the market.
"A lower rung means a worse instrument." A lower rung is a statement about volatility, not about quality, legitimacy or suitability. Individual equities sit at 5:1 and are the most ordinary investments in existence; the rung reflects what single-name concentration risk does inside a leveraged wrapper, not a verdict on the company. Reading the ladder as a quality ranking gets it backwards — plenty of people lose money at 30:1 on the calmest market on the list.
"The caps are identical across Europe." They are materially similar, and they are not automatically the same. ESMA's own measures expired and were replaced by permanent national measures adopted regulator by regulator, and national regulators can and do attach their own conditions. The rule that binds your broker is the one issued by the regulator that authorised the entity holding your account — which is a different question from where the brand is headquartered.
How to Actually Use the Ladder
The ladder is published, free, and updated by people with far better data than a retail trader has. Three practical uses:
- Treat a rung as a position-sizing prior. If you are trading a 5:1 instrument with the same risk-per-trade you use on a 30:1 instrument, you are implicitly claiming the regulator's volatility ranking is wrong for your case. That is possible. It should be a decision, not an accident.
- Use it to sanity-check an unfamiliar market. Before trading something new, find its rung. A market you have never traded that sits at 10:1 or below is telling you something about gap risk before you have looked at a single chart.
- Use it as an authorisation test. An offer of 500:1 on a major pair to a retail client in the EEA or UK is not a better deal on the same product. It means you are not being onboarded where you think you are — the subject of what 1000:1 leverage actually costs you.
What to Check With Your Broker
The ladder is a legal minimum standard. What your particular account actually does is a separate question, and about five minutes inside the platform and the client agreement will answer it.
- Which legal entity holds your account, and which regulator authorised it. This decides which national version of the caps applies to you. It is in the client agreement, not on the marketing pages, and on a multi-entity brand the two can differ.
- Whether the firm applies tighter leverage than the cap on any instrument. Firms are free to be stricter than the rule and many are, particularly around scheduled economic releases and over weekends. A 20:1 cap on gold does not oblige your broker to offer you 20:1 on gold.
- How the platform classifies the specific instrument you intend to trade. "Non-major currency pair", "major equity index" and "other reference values" are defined categories, and an instrument's rung is not always guessable from its name. Ask which rung it sits on rather than inferring it from the ticker.
- Whether the ratio steps down as the position grows. Tiered margin is common and entirely legitimate, but it means the headline number may not be the number you get at the size you actually want to trade. Ask for the tier table.
- Your own client categorisation. Every figure on this page assumes you are a retail client. If you have ever elected professional status, none of it applies to you — see what electing professional status hands over.
If the underlying mechanics of margin are still unfamiliar, how leverage works in forex trading covers them from first principles, and position sizing and risk management covers what to do with the number once you have it.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. A majority of retail investor accounts lose money when trading CFDs — commonly disclosed at between 51% and 89%. Leverage caps limit position size at entry; they do not limit losses. Capital is at risk, product availability varies by country, and nothing here is a recommendation.
This article is for informational and educational purposes only and does not constitute financial, legal or investment advice. Leverage limits are set by national regulators and change; verify the current caps with your broker's regulator before relying on any figure here.