Forex Brokers Without Leverage - Are There Any?
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.
eToro allows traders to trade without leverage. On eToro, clients can freely trade without leverage as long as they can fully fund their positions. Trading on eToro gives you access to a variety of trading instruments. These include CFDs on forex, commodities, ETFs, and indices or purchasing real stocks and cryptocurrencies. As you can see on the screenshot below the paragraph, eToro allows you to trade 1:1, meaning no leverage will be applied. Alternatively, you can also select trading with 1:2, 1:5, 1:10, 1:20 or 1:30 leverage.
It is important to note that eToro follows strict regulatory laws concerning leverage. If a trader chooses to trade with leverage, they can rest assured they are trading with one of the most heavily regulated brokers in the market. eToro has regulations in the UK by the FCA, Cyprus by the CySEC, and Australia by the ASIC. This makes eToro one of the best forex brokers not only in Europe but in other parts of the world as well.
In terms of trading fees, eToro approaches this with full transparency. This platform has no hidden fees, and the company dedicates a page to disclose all the fees involved. Furthermore, the spreads are reasonably low and industry-standard. The spreads can go as low as 1 pip for some major currency pairs.
79% of retail CFD accounts lose money with this provider. You should
consider whether you can afford to take the high risk of losing your money.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs (such as forex, commodities and stocks).
XM offers clients flexible leverage between 1:1 and 1:1000 (subject to availability). This means that traders on XM can gladly trade without leverage as long as they can fully fund their positions from their account balances. However, this option is only available to clients outside the EU. XM Also offers negative balance protection, which is very important for traders who choose to use leverage. This ensures that they do not overleverage and fall into debt.
There are many instruments you can trade on XM. They can trade assets in the forex, stocks, indices, shares, cryptocurrencies, commodities, precious metals, and energies markets. This is a great collection of market instruments to diversify your portfolio greatly.
Luckily, XM is a regulated broker and follows strict regulatory laws and regulations. Two regulators watching XM’s activities are the CySEC and the ASIC. These are top-tier regulators, which is refreshing to see on XM’s collection of the regulatory lineup. However, regulation alone is not enough. But it is better to invest with a company that has regulations than one without.
FXTM also allows clients to trade without leverage as long as they have enough money in their accounts to fully fund their trades. This is mostly suitable for traders who want to avoid taking extensive risks in the market. There are a variety of trading instruments available on FXTM. Traders can buy and sell assets in the forex, metals, stocks, stocks CFDs, commodities, indices, stock baskets, and forex 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.