How to trade forex without a broker?
This beginner friendly guide explores the different options traders have. We discuss if you can trade without a forex broker, explain how to trade without a broker, and compare the top platforms to use for forex trading.
Is it possible to trade forex without a broker?Copy link to section
Yes, although using a broker is the easiest way to speculate on currency fluctuations. Forex trading is essentially exchanging one currency for another and it is not necessary to use a broker for this service. Lots of people use a bureau de change at the airport for example. Other common places you can buy and sell FX are banks and post offices.
While in theory, you could use any of the above services, it will be very difficult, expensive, and long winded to use them for trading activities. Many of these services have vastly different rates compared to online brokerage firms. Their spreads are much higher than what you’ll find with a broker, as are commissions and other charges.
Trading forex without a broker exposes you to unnecessary risk and makes the process much longer compared to using an online company. Forex brokers can give you direct access to the market so you’ll get the best prices. You can also use a stop loss on a brokerage platform that protects you from big swings in prices.
How to trade without a forex brokerCopy link to section
There are a few options available if you want to trade forex without a broker. Although, by not using a broker, you will incur high fees and experience long transaction times. You also will be unable to trade on margin and require large sums of money to make meaningful returns. Below are three ways that explain how to trade forex without a broker.
Use a peer-to-peer currency exchangeCopy link to section
P2P currency exchanges are online platforms that allow users to send and receive foreign currency with each other. You can use a P2P platform to trade forex without a broker. Compared to banks, P2P exchanges are much cheaper, although rates are not as good as you’ll find with a broker. To trade using a peer-to-peer exchange, you can buy and send currencies to your own account and exchange when rates are favourable.
Deposit money into a bank to trade foreign currencyCopy link to section
You can use a bank account, or multiple bank accounts to trade forex without a broker. The simplest way is to open two bank accounts in different currencies. For example, you can use an account based in GBP and an account based in USD and transfer funds between the two to exploit rate fluctuations. This will likely be very expensive and you’ll need to deposit large sums into each account.
Buy and sell at a bureau de changeCopy link to section
A bureau de change is another option and is a common sight in airports. You can keep track of rates and exchange currencies using the services of a bureau de change. For example, you could exchange GBP for EUR when the pound is strong and Euro is weak. You could then exchange them back at a later date if prices move in your direction. Spreads and commissions will likely be high so using this method to trade forex is quite unpractical.
What is a forex broker?Copy link to section
It’s an online company that allows you to trade the forex market. Forex brokers work in lots of different ways but generally act as an intermediary between you and the interbank market (where banks trade currencies with each other). Most brokers operate online and to access their trading terminals you will need to use a piece of software known as a platform.
A trading platform is what connects you to your brokerage account and facilitates the buying and selling of currencies. Trading platforms come in all different shapes and sizes and the most popular one for forex is MetaTrader 4. When using a forex broker you will be able to trade a broad range of FX pairs, use technical tools, and price charts for analysis.
Platforms can be used on a computer or via a mobile app. There are many different types of brokers. ECN and STP brokers connect you directly to the interbank market so you can have the best prices and fastest execution. Others let you trade forex using CFDs, and most give you the ability to trade using leverage.
Benefits and risks of trading forex without a brokerCopy link to section
Although it is possible to trade forex without a broker it is generally not recommended. There are some benefits but there are many more risks and below we have included a few of the key ones:
BenefitsCopy link to section
- Less chance of falling for online scams or fraud
- You don’t need a bank account and can make all transactions using cash
Which broker should I use?Copy link to section
Now that you know the benefits of using a broker compared to not using one you may be ready to start trading. You can click on any of the links below to register an account with some of the best forex brokers around and start trading in just a few minutes.
77% of retail CFD accounts lose money.
CFD service. 82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
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