Leverage is what makes spread betting both powerful and dangerous. Understanding how margin works is essential before you place a single trade.
What Is Margin?
Margin is the deposit you need to open a spread bet. It is a fraction of the full position value. For example, with 20:1 leverage on the FTSE 100, you only need to deposit 5% of the position value as margin.
Worked Example
FTSE 100 at 10,800. You bet £5 per point. Full position value: 10,800 × £5 = £54,000. At 5% margin, you need £2,700 in your account to open this trade.
FCA Leverage Caps (Since 2019)
| Asset Class | Max Leverage | Margin Rate |
|---|---|---|
| Major forex pairs | 30:1 | 3.33% |
| Minor forex, major indices, gold | 20:1 | 5% |
| Other commodities | 10:1 | 10% |
| Individual shares | 5:1 | 20% |
| Cryptocurrencies | Not available — crypto derivatives are banned for UK retail clients (see our crypto guide) | |
These caps were introduced by the FCA to protect retail traders from excessive losses. Professional clients can apply for higher leverage, but give up negative balance protection and access to the Financial Ombudsman Service, and firms are not required to apply the retail leverage caps or the standard risk warnings to them.
How Leverage Amplifies Returns
With £1,000 and 20:1 leverage on the FTSE:
- You control a £20,000 position
- If the FTSE rises 1%, your position gains £200 (20% return on your £1,000)
- If the FTSE falls 1%, your position loses £200 (20% loss on your £1,000)
- A 5% fall would wipe out your entire £1,000 margin
Margin Calls
If your open positions move against you and your account balance falls below the required margin, you will receive a margin call. This means you need to either:
- Deposit more funds to cover the margin requirement
- Close some positions to free up margin
If you do neither, the broker will begin closing your positions automatically (a margin close-out). Thanks to FCA negative balance protection, your account cannot go below zero — but you can still lose your entire deposit. Use our spread calculator to check margin requirements before opening a trade.
Practical Margin Tips
- Never use your full available margin. Keep at least 50% of your account as free margin to absorb losses without triggering a margin call.
- Use less leverage than the maximum. Just because you can trade at 20:1 does not mean you should. Many experienced traders use 5:1 or less. See our risk management guide for position sizing rules.
- Check margin requirements before placing a trade. Your broker will show the required margin before you confirm the order.
- Account for overnight margin. Some brokers increase margin requirements outside of market hours.
Between 51-82% of retail investor accounts lose money when spread betting. Leverage is a double-edged sword — use it carefully.
