Leverage

Leverage (Hebel) means multiplying the effect of an investment with borrowed capital. What sounds like quick riches is one of the most common routes to big losses for private investors.

How leverage works:

You deposit a security payment (margin) and move a multiple of it on the market:

• Leverage 5: a €1,000 stake moves €5,000. Price +2% = +€100 (+10%). Price −2% = −€100 (−10%)
• Leverage 10: a €1,000 stake moves €10,000. Price +1% = +€100. Price −1% = −€100
• Leverage 30: €1,000 moves €30,000. Price −3.3% = total loss!

BaFin regulation since 2018 (ESMA):

• Share CFDs: max. leverage 5:1
• Index CFDs (DAX): max. leverage 20:1
• Forex (major currencies): max. leverage 30:1
• Crypto CFDs: max. leverage 2:1
• Obligation for private investors to make additional payments prohibited (since 2017)

The brutal statistics:

Every CFD broker must publish how many clients lose money. The figures: eToro: 77%, Plus500: 82%, IG: 75%, CMC Markets: 78%. Three out of four private investors lose money with leveraged products.

Conclusion: leveraged products are designed for professional hedging – not as a turbo for private investors. A simple ETF savings plan beats almost every leverage trader in the long run.