What Does 20x Leverage Mean in eToro?

Written by Mike Druttman

Reviewed by Nadav Zelver

On eToro, using 20x leverage means you're amplifying your trading position to be twenty times larger than your initial investment. This is achieved through Contracts for Difference (CFDs), which allows you to control a substantial position with a relatively small amount of capital.​

20x Leverage Explained

Leverage is a tool that lets traders increase their exposure to financial markets without committing the full amount of capital required. A 20x leverage implies that for every $1 you invest, you can open a position worth $20. This magnifies both potential gains and potential losses.​

Here's an example:

However, if the asset's price decreases by 1%, the loss would also be $200. This shows the increased risk associated with leverage.​

Things to Consider

• Margin Requirement: To open a leveraged position, you must maintain a certain amount of equity in your account, known as the margin. If your account equity falls below the required margin, eToro may initiate a margin call, requesting additional funds, or close your position to prevent further losses.​
• Overnight Fees: Holding leveraged positions overnight incurs fees, as you're essentially borrowing funds to maintain the position. These fees can accumulate over time and could have an effect on your profits.​
• Risk Management: While leverage can possibly increase the profits, it also increases the potential for significant losses. It's important that you learn how to implement risk management strategies, such as setting stop-loss orders and only using leverage levels that are matched with your risk tolerance and trading experience.​

eToro gives you the tools to use leverage the right way but here’s the deal: just because you can use it, doesn’t mean you should dive in headfirst. Make sure you understand the risks before you crank up the leverage. Trust me, I’ve been there. Tried a high ratio without thinking it through and paid the price. So don’t make the same mistake and know what you’re getting into.