X1 leverage can be found on many broker platforms, especially those that are more CFD oriented. But what does it mean, and how do you use it? We will run through the main things you need to know below.
What is X1 Leverage?
Simply put, x1 leverage is the usage of no additional leverage in your trade. This would mean that when you trade with x1, you are trading without margin or without leverage in essence. With certain trading platforms, when you select x1 leverage that means you are trading with the underlying asset rather than as a CFD. If you want to know more about the pros and cons of CFD trading versus the underlying asset you can find that here.
How do you use X1 Leverage in your trades?
Usually there will be a slider or an options box (example of which you can see above) which allows you to select the level of leverage you would like to use on a trade by trade basis. Depending on the level of risk you would wish to take on a trade, you can then control the amount of leverage accordingly. As you adjust the slider from x5 to x1 leverage in this case, the risk warning underneath the leverage box will change, indicating that the way you are trading is being altered.
You can see from the example above, when trading certain instruments with eToro on x1 leverage, you will be trading with the underlying asset rather than via a CFD. As well as being a way for users to access instruments in a wider variety of ways, this also opens up the potential to take a more longer term position without the other costs usually associated with CFDs. This would mean that you are not liable to any of the usual overnight fees/borrow fees that can be attached to a CFD contract due to the margin usage. You will find various cryptocurrencies and stocks as typical assets that you can trade on the underlying asset at eToro using x1 leverage depending on the region in the world you find yourself.
Risk management and x1 leverage
Risk management is an essential part to not ‘blowing up’ your account. For instruments that are very volatile, using x1 leverage can be a way of controlling your exposure to the volatility, keeping your risk to a level that you are comfortable with and within the bounds of your account value.
There can and will be times when you would want to use more or less leverage as part of a prudent risk management strategy. This should be something that you build out in advance within your trading plan.
If you are already actively trading and find yourself without a trading plan, please get one in place before your next trade.