Forex broker without leverage – Is it possible?

Forex traders register forex trading accounts hoping they will make profits as they trade. One of the factors that allow traders to make profits is leverage. The forex market has the highest forex leverage from various brokers. 

Forex leverage has two outcomes if the market goes according to a forex trader’s prediction, they could make good profits. They can magnify their losses if the market goes against a forex broker. One question that forex traders often ask is whether traders can open and close positions without leverage. 

We will look at this question closely and figure out whether forex brokers can allow leverage-free trading

Different currency pairs in comparison
Some people prefer to trade without leverage because of the lower risk involved.

What is leverage in forex trading?

In simple terms, forex leverage is borrowing funds from a forex broker to increase the purchasing power. Forex brokers have a ratio or percentage, which forex traders use to calculate how much funds they can borrow from a forex broker. 

A  forex term traders come across is margin, which is closely related to leverage. Margin is an amount that the forex broker requires a forex trader to deposit to access the forex leverage. It allows forex brokers to open big positions using a small deposit. 

How does leverage work?

Forex brokers have different leverage rates offered to forex traders. They can start from 1:30 to 1:3000 it depends on the region you are trading at. Some countries have strict forex policies restricting high forex leverage due to the risks to forex traders. 

An example is when a forex broker has a leverage ratio of 1:100, and a forex broker has $1000 capital in their trading account. The forex trader can use this leverage to open a position worth $100,000. You calculate the forex leverage using the leverage ratio or percentage offered. 

In this scenario, the margin is 1% of the total amount you want to borrow. If the forex broker uses the $1000 as the margin, then the total forex leverage they can get is $100,000. If you open a position with forex leverage of $100,000 and the market moves against you, the broker issues a margin call. 

A margin call is a notification to a forex trader, asking them to increase funds on the trading account. It takes place when the losses are approaching the amount used as margin. It is a method a forex broker uses to mitigate the losses they can potentially incur. 

Leverage in forex trading

When can you trade without using leverage?

There are two instances that a forex trader can trade without using leverage. 

If they access financial markets where the minimum lot has a low value than the forex market. It means that forex traders can manage to open trading positions. These financial markets are like CFDs on cryptocurrencies, metals, stock indices, oil, and stocks

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Retail traders 

Another instance is when forex traders have a high capital to sustain big positions. Forex traders with trading balances from $10,000 and above can comfortably open several trading positions without the funds becoming a limiting factor.

They will still need to top up their accounts more than they would use leverage. 

Corporate traders 

These are institutions and companies with proprietary trading firms that use high capital when trading. These forex traders usually trade high volumes from $1000,000 and more. These forex traders do not need forex leverage since they can open several big positions. 

These corporate traders often buy a high percentage of the total shares and act as liquidity providers. Forex brokers cannot offer such high leverage to these forex brokers, one reason why they don’t use forex leverage

Forex chart

How can you trade without leverage?

Forex brokers have high leverage set at a point, for example, 1:2000, and low forex leverage of 1:1. Note that these ratios are different in forex brokers, as others have higher or lower leverage limits. If you want to trade without forex leverage, you can set your trading account as 1:1. 

The forex spreads and costs still apply but at a manageable cost. This setting allows you to risk what you have as capital instead of more funds using leverage. 

Here are some tips you can use when you want to start trading without leverage:

1. A trading strategy 

It is where most forex traders have difficulty when trading. It can be hard to find a strategy that works most of the time. It is why traders should use the demo account to practice various trading strategies before moving to the live trading account. 

There are many quality resources that traders can use to develop trading strategies. Some forex brokers even have educational resources for guidance. You can also learn from professional traders using copy/social trading options. 

A good trading strategy in trading is a strategy that has consistent results when applied in most financial markets. Traders can continue developing their trading strategies as they trade. This step is crucial if you decide to use your funds to avoid making mistakes that could cost you your capital. 

Forex trading without leverage via tablet

2. Ensure you have enough balance in your account

Consider having enough funds to open positions without constantly depositing them in your trading account. Forex traders should consider having a minimum account balance of $5000 to open and close several trades. 

3. Apply risk management strategies 

It is mistake forex traders make by trading without leverage. Even though the risk of magnifying reduces when using your funds, you can also lose your capital. There are different risk management strategies you can apply like:

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Stop-loss/ limit order 

It is an order you set on your forex broker if the price of your asset falls to a point. A forex trader has to place the stop-loss order at a price lower than the buying price to limit losses. The forex broker executes the order when the market falls to that price. 

It is efficient for forex traders, especially if they are trading in a volatile market where the prices can fall or rise. The limit order is similar to the stop-loss orders by limiting the forex broker to buying or selling when prices reach a specific price

Take profit order 

It is opposite to the stop-loss order but similar to the limit order. Forex traders can set this order after performing a cost-benefit analysis. The take profit order is a price where the forex trader considers the ideal profit. 

The forex broker will then execute this order by selling at that price. The take-profit order can limit the profits if set too early from a point. It can also lead to losses if it is much later and the market prices plummet before the take-profit. 

It is crucial to do fundamental and technical research about a market before setting the take-profit and the stop loss. This order is for forex traders to take profits at a profit before the prices fall. 

Control risk 

It is crucial when you are trading without leverage such that a forex trader only risks a certain percentage of the capital they have. This control loss strategy is used when trading short-term such as day traders and scalpers. 

It works by controlling losses that you can get by risking a small percentage of the total capital. You can use 5% of the total account balance on a trade, such that even if you make consistent losses, it takes the longest to complete the balance on your account. 

Advantages of trading forex without leverage:

Advantages of trading forex without leverage

1. Reduced risks 

Most forex traders turn to trade without leverage to avoid the risks of leverage trading. Trading without forex leverage means you are only risking the capital you have. It is less complicated than using forex leverage, and forex traders can budget for the trades easily

2. It has less psychological stress 

Using leverage applies some form of emotional tension to a forex trader. The unpredictable nature of the forex market and high leveraged trading could potentially lead to losses or profits. 

Trading without leverage has psychological pressure since you are risking your capital. But the stress gets reduced since you are not using forex leverage. 

Disadvantages of not leverage trading

Low profits 

You can multiply your profits using leverage, unlike without forex leverage. Without forex leverage, you open small positions to limit the risks of committing all your capital in one trade. 

Leverage allows you to use a percentage of the total amount in your trading account to open big positions. It means that you can increase your profits significantly. 

It limits your purchase ability

When you use leverage, you can open several positions in a day since you can access more funds. When you compare to using your funds, it can limit you from opening more positions unless you have a high account balance. 

Traders can diversify their potential using leverage, buy different assets and reduce the chances of experiencing losses. 

Forex chart

Trading costs apply even with 1:1 forex leverage

Forex traders who don’t use leverage can set their accounts to 1:1. Even if the leverage ratio is 1:1, trading costs like commissions and overnight fees apply. 

Conclusion – There are great brokers that offer no-leverage-trading

Trading without leverage could suffice for forex traders who would like to avoid the risk of using high forex leverage. It means that these traders have to use a high account balance to compete with those with forex leverage. 

Retail traders can’t trade without leverage with online brokers. It has limiting factors that restrict an effective trading environment and limit losses. 

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FAQ – The most asked questions about Forex brokers without leverage: 

Can I trade forex without leverage?

You can trade forex without leverage, but you will limit the profit you can make using forex leverage. Furthermore, you can only open a few positions in a day when trading using your capital. ‘

Can you make profits in forex without using leverage?

It is unlikely to make high profits when you factor in the trading costs. More so, if the market is volatile, and spreads widen, a trader is likely to lose more trades. 

Does forex trading require leverage?

You don’t necessarily have to use leverage, even though it may be available and offered. However, for many people, it is the sensible way to open trades without using leverage without making a sizable initial investment.

How can you purchase stocks without using leverage?

Directly purchasing shares from a firm is one option. You can achieve this by working with a broker or signing up for a direct stock market purchasing plan. Purchasing stocks through a mutual fund is another way to engage in stock trading without the use of leverage.

Which trading platform is best without leverage?

The best trading system for Trading forex without leverage may vary depending on the needs and preferences of each investor; thus, there is no universally applicable solution to this query. The platform’s fees and the trading assets available are a few variables that could be taken into account.

Can you profit in forex without using leverage?

Without using leverage, one can still profit from trading forex. Though it should be emphasized that trading without leverage often yields fewer earnings (or losses), it does provide one more control over their account. 

Last Updated on January 27, 2023 by Arkady Müller