How to avoid using Leverage on CFDS?

Beginner Questions
1

Hi

All the CFD brokers state that CFDs’ are leveraged products.

I want to start trading CFDs’ in the future but I want to learn how to AVOID using leverage.

My question is: When I sign up with a broker, will they simply ask me “would you like to use leverage or not?”.

In this case I would simply say NOT to use leverage.

However, i believe that this is not the case. I believe the leverage is placed on automatically and there is some method i must learn to avoid using it.

Does anybody know how to AVOID using leverage with my broker?

Thanks in advance

2

Sure - just buy the underlying asset in cash.

With a CFD you’d have to buy/sell units whereby the cash value equals the notional value of the derivitive.

For this you better have deep pockets my friend :wink:

3

I think, in this case you can request them by live chat or email.

4

Thank you for the response

Will the brokers platform have an option to buy or sell in either cash or by using leverage?

For example; I do not know how to do that on MT4.

Regarding deep pockets, firstly I don’t have deep pockets lol… but I am willing to take calculated risks once I have studied enough. I am willing to risk lets say £1,000 to buy 100,000 units with a 135 Pip stop loss. This gives me a value per PIP of approximately 7.4.

I think this is pretty decent if I can make 30 pips per day, and cut my losses quick

What do you think?

5

Yes, £200 per day from £1,000 would be rather remarkable. I wonder why no one else can make 20% ROI per day :rolling_eyes:

Come on man, it doesn’t work like that.

A few wild bets and yes you could achive this, perhaps even for an extended period of time, but it’s with 100% certainty that it’s not going to be maintainable.

Edit: Just for your own benefit lets look at your example.

  • Lets assume you do have a £1,000 account and you buy 100,000 units of GBPUSD.

  • The current rate is 1.3468, so your account would be valued at $1,346.80

  • You’re buying 100,000 GBP units, approx valued at a notional value $134,680 against a bank roll of $1,346.80? A pip value of £7.42 as you already stated.

What’s your leverage, and your initial question was about using no leverage?

(under the new european law you wont even be allowed to take this ‘bet’)

Answer: Your using 100 to 1 leverage, which is just ludacris :wink:

1 Like
6

It’s just weird that someone numerate enough to work that out can also be naive enough actually to imagine that he could make it work.

There just isn’t a sensible way to respond to what you’re asking (though the Bacon Sandwich had a pretty good attempt at it). “Just ludicrous” was about right, anyway.

7

Might have to help me out LC, i’m on the wine so my numbers might be out!

8

Ive never traded CFDs before because they arent allowed in the US but trading FX through FXCM many moons ago i was allowed to adjust the leverage on my account. Although that isnt even really necessary as long as your broker offers smaller lot sizes you can just control your leverage yourself. By that I mean even if your broker forces 100 to 1, theres no reason you have to use it all. You can keep it at around 5 to 1 or 10 to 1 just through position sizing.

1 Like
9

Just so im clear, having a 100 to 1 on a 10,000 dollar account means you can hold up to 1 million of nominal in positions against your account. If you want to stick with a 1 to 1 simply never hold more than 10k nom. If you want your max leverage to be 10 to 1 then never hold more than 100k nom, and so on.

10

What sort of wine do you drink with bacon sandwiches?

11

I’ve been told a good Pinot Noir goes well with lots of red meat - although according to your last post which was in the wrong thread I also can only assume you like a little tickle too? :grin:

12

Sorry about that. I saw two of your posts and replied to the wrong one. Sober here, too.

1 Like
13

Thanks for the response,

The example I provided was of me RISKING £1,000 - not having a total account balance of £1,000.

If for example my account balance is £10,000, then I am willing to risk £1,000 in order to make £200, that is what I am saying. I would adjust the trade when I see fit in order to minimize my losses and increase my gains. What do you find remarkable about this?

The 30 pips was merely a target, I know it cannot be done everyday nor was I suggesting that it can. I am still at the very early stages of studies, but this leverage question was just something that was playing on my mind so I wanted to ask it.

You have helped me somewhat because based on your answer “Your using 100 to 1 leverage” I think I understand a little more than I did previously.

Many thanks

14

What exactly do you want to achieve? Because right now it sounds like you’re confused between leverage, notional values and ROI.

FYI, risking £1,000 to make £200 is again not a sound decision - hopefully this is the way your post reads rather than what you really mean.

15

Haha, the post kind of went off in another direction.

Anyway, I do not understand the concept of leverage because I have not read into it yet. I just wanted to know how to avoid using it because a friend of mine advised me not to.

I have a lot of studying to do before I should be asking these questions but like I said it was in my mind so I asked.

Let me present you with a question and maybe you can help me: if my account balance is £5,000 and I wish to buy 100,000 units of a currency. Is it possible to do WITHOUT using leverage? Has it got something to do with the STOP LOSS pip value?

Many thanks

16

If you wish to trade without leverage, then you simply just limit your position size to just £5,000. Or to make it simpler, 5,000 units (equivalent to 5 micro lots).

Trading 5,000 units of EUR/USD would give you an initial position size of $5,000, so in this case, you’d be underleveraged.

1 Like
17

Don´t work with a broker. Work with Uphold an ewallet (USA). They offer fiat and crypto currencies. https://uphold.com/. Rewievs about Uphold: https://es.trustpilot.com/review/uphold.com
They don´t work with leverage.

18

Right you little eager beaver - stop focusing on 100,000 units (1 std lot). This should be the varibale, not the fixed value in your calculation - once you’ve decided your risk as a % of your total account balance and the required Stop Loss needed you then as a result obtain your postion size.

  • This is rule 1, it’s always rule 1 and will always be rule 1 in any thought process for a trade.

To answer your question, in short, NO you cant open a 100,000 unit position in GBP with a £5K account using 1:1 leverage.

For Example,

Lets say you require a 50pip SL with your chosen trade set-up, and you want to risk 1% of your account on this trade - you choose 1% because your prudent and want to be around for the long term, if this isn’t the case then you’d be playing roulette whilst drunk. (a hobby of mine by the way ;))

The maths for this is as follows, we will assume your account is in GBP valued at £5K as you mentiond and the FX rate for GBPUSD id 1.3468.

  • £5K x 1% = £50
  • £50 x 1.3468 = $67.34 (this is your total risk in USD)
  • $67.34 / 50pips SL = $1.34 (this is your position size in USD)
  • This is equal to 10,340 units, a notional value of $10,340 against a bank roll of $6,734 - leverage used here is 1.53 to 1.

In order to trade 100,000 units at 1:1 leverage your notional value per pip must equal your account balance. In the above example you would need a bank balance of £100,000 to trade 100,000 units (1 std lot) at 1:1 Leverge [@clint is this right ;)]

1 Like
19

Thanks man, you just helped me quite a lot with that explanation, I am really grateful for that.

Can you tell me how you calculated 10,340 units with the $1.34 position size in USD because I cannot understand WHY you have labeled this amount ($1.34) the position size - i know the math that you did to get the figure (67.34/50) but why have you chosen to call this the “POSITION SIZE” since I understand the position size to be the UNITS.

Also, that leverage you have calculated (1.53 to 1), can you tell me the effect of this? In other words, has the BROKER borrowed any money to me in this case?

I am quite confused and I am sure I will understand as I continue my studies but I thought I would ask you since you have been helping me a lot so far.

Thanks in advance

20

To be honest I am not interested in crypto currencies but thanks for the information