Leverage trading is one of the main reasons why traders trade forex. Leverage allows you to open much larger positions even with a small capital.
However, there are some people who do not want to trade with leverage.
In this article we will look at:
- How and where to trade without leverage
- What to watch out for
- What are the alternatives to trading without leverage
Can I trade forex without leverage?
Let’s start with a fundamental question: is it possible to trade without leverage?
Yes, most brokers offer this option. If you do not have the possibility to trade without leverage with your broker then look for another one.
How to trade forex without leverage?
To trade without leverage you must have the option to set the leverage to 1:1. Some brokers allow you to change this option directly in the trading panel. Below is an example of how to change leverage to 1:1 at Tickmill:
How does it work in practice?
In Forex we trade lots. 1 lot is 100,000 of the base currency, 0.2 lots is 20,000 of the base currency, 2 lots is 200,000 of the base currency and so on.
With leverage you do not need to have the full 100,000 in your account to open a 1 lot position. You can have correspondingly less.
For example, with a leverage of 1:30, your account balance is multiplied by 30, allowing you to open correspondingly larger positions. This, in turn, translates into a value of profit/loss on the movement of each pip. But these are the details of how leverage works, which I am sure you already understand.
When you choose 1:1 leverage it is equivalent to saying:
I do not want the value of my account to be increased. I want to open positions of a size consistent with what I have in my account.
To summarize:
- If you have 10,000 in your account and the leverage is 1:1 then you will be able to open a position with a maximum size of 0.1.
- If you have 4,000 in your account and the leverage is 1:1, you will be able to open a position of maximum size 0.04
- etc.
As you can see, trading without leverage is possible. You simply need to reduce the leverage to 1:1.
Can you make money in forex without leverage
Of course you can. The same rules apply as when trading with leverage. It is just that your profits will largely depend on the size of your account. As I mentioned earlier, if you have a smaller amount on your broker account, for example a few thousand dollars, without leverage (i.e. with leverage set at 1:1) you will be able to open very small positions of 0.04 lots. This of course will affect the size of your profits and losses.
The alternative – microlots
There are various reasons why traders decide to trade without leverage:
- capital protection
- they are at the learning stage and do not want to take unnecessary risks
- other
If you want to trade without leverage because you are at the learning stage then consider trading on microlots or nanolots. Some brokers such as Oanda allow you to trade on these types of lots.
What are micro and nanolots? These are lots where the value of each individual pip is much smaller than in a standard lot. For more information about nano and microlots please click here: https://www.investopedia.com/terms/m/micro-lot.asp.
This is a really interesting alternative if you do not want to risk your capital using standard leverage.
Avoid unreliable brokers
If your strategy is to trade without leverage and you are going to add more money to your account with a broker then take safety issues into consideration. Choose only reliable brokers with proper licenses.
In conclusion
It is possible to make money without leverage. It is always better to start with smaller leverage or even trade without leverage and then increase it later when feel more confident 🙂
