Leverage is a crucial part of trading financial markets online. In a nutshell, leverage is borrowing a certain amount of money to finance an order fully. In trading, the money is usually borrowed from a broker. When using leverage, the broker provides traders with the extra money they need to finance their position.
On the flip side, you can choose to trade without using leverage. There are a couple of advantages and disadvantages that come with this. In this article, we will look at trading without leverage and the associated pros and cons. We will also look at some of the brokers that allow trading without leverage.
Trading With Leverage
Trading using leverage allows one to control higher positions than what your trading account balance allows if you were to pay for the position outright. However, it is important to note that leverage trading magnifies both your losses and profits. This means trading with leverage can give you large profits and high potential losses. Using leverage trading, you are only required to trade a small percentage of your account balance. Different brokers offer different leverage terms. Most regulated brokers implement the leverage by relying on the regulatory authorities overseeing online trading in their jurisdiction.
The use of leverage depends on several factors, such as trading experience, level of risk, goals of the trading, and the market they are trading. Professional traders normally aggressively use leverage, while beginners generally use leverage with caution. Conservative traders will tend to use the minimum level of leverage possible, whereas traders with a high appetite for risk can use leverage flexibly.
Trading without leverage
Trading financial markets is still possible even without leverage. However, this requires clients to finance their positions fully from their account balances. Choosing whether to trade without leverage totally depends on a trader’s account balance. Below are some of the pros and cons of no-leverage trading.
Pros of trading without leverage
- Reduces the potential losses – Using leverage means trading with money you do not have in your account. This can lead to overleveraging, which puts you in debt.
- It is easier to recover losses as you will not be in debt to the broker.
- Trading without leverage can lower the effect of some emotions in the market. Trading with leverage can amplify traders’ fear and greed as they try to recover the money they borrowed and earn a profit at the same time.
- Traders tend to be more disciplined when trading without leverage. This is because they are trading their own money.
- The stress level associated with trading without leverage can be considerably lower than trading with leverage. When a trader loses money that is not fully their own, it can be stressful, and they may want to recover the lost funds.
Cons of trading without leverage
- Trading without leverage requires considerably higher capital. Any trader looking to trade without leverage must maintain their market position using their own account balance.
- No leverage trading can limit the size of trade positions a trader can fund. Hence, it can limit trades.
- Trading without leverage can lower the capital and hence lower the potential profit.
Where to Trade Without Leverage
Now that we got that out of the way, here are some of the best forex brokers without leverage.
XTB
XTB is a popular forex and CFDs broker regulated by the CySEC in Cyprus, the KNF in Poland, the FCA in the UK and the FSC in Belize. The broker provides access to no leverage trading (meaning you trade 1:1) on two trading asset classes: stocks and ETFs. When trading these asset classes you buy the real underlying assets. The company also supports trading CFDs on forex, stocks, indices, commodities and cryptocurrencies (the minimum leverage is,however, higher depending on from what country you reside in).
XTB proudly serves over 1 million clients and is publicly listed on the Warsaw Stock Exchange. Their customer service team provides support in 18 languages and is available Monday through Friday via email, chat, or phone.
FBS
FBS is a global broker regulated by the CySEC in Cyprus and the FSC in Belize. The company supports speculation on CFDs on forex, commodities, indices, stocks and cryptocurrencies. FBS clients can trade forex instruments at FBS without leverage, meaning you trade 1:1. However, to access no leverage trading the sum of equity on a client’s trading account must be 150 000 or more (USD or EUR) as per their official margin and leverage page. The minimum spreads on this broker site are very low starting at 0.7 pips with no commisions paid
The broker provides access to two world’s leading forex retail platforms: MT4 and MT5 and supports over 200+ global and local payment methods for deposits and withdrawals. FBS serves over 27 million clients across 150+ countries, offering round-the-clock customer support.
FXTM
FXTM also allows clients to trade with a 1:1 leverage ratio, as long as they meet the necessary conditions. To change your leverage to a 1:1 ratio, you need to have at least a $1,000 balance in your trading account and submit a request under the Trading Platforms Settings. Please ensure that you do not have any open orders on your trading account for your request to be successfully processed.
There are a variety of trading instruments available on FXTM. Traders can trade CFDs on forex, metals, stocks, commodities, indices and indices. While not all traders want to invest in many markets, some want to diversify their portfolios. It is good to know that this option is available when needed.
In terms of regulations, FXTM has a good standing. FXTM has regulations from two of the best regulators in the market, the CySEC, and the FCA. Regulated brokers are required to have a number of measures to protect client funds while trading. They provide some of the safest trading conditions. This is why you should only trade with regulated brokers in the market.
Should You Trade With or Without Leverage?
Both leverage and no-leverage trading have their advantages and disadvantages. Leverage used correctly can be very helpful. But when the market goes against the trader, it magnifies the losses. In contrast, no leverage has lower risks but lower profits.
Whether or not to use leverage while trading is a personal decision for the trader. Choosing whether to use leverage depends on the individual’s style of trading, risk tolerance, and capital availability. It is more advisable for beginners to start with small manageable leverage as they gain experience and grow the account. Most importantly, it is advisable to use a demo account to train. This will help you to learn how to manage risks and limit losses. As the confidence increases, you can increase the leverage or move to a high account as long as you can manage.
Regardless of your choice, you should be aware of the risk and have discipline in your trading strategy, behaviour, and risk management plan.
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