Is it always mandatory in every trading platform to trade with leverage?

<p id="isPasted">No, it is not always mandatory to trade with leverage in every trading platform. Many platforms allow you to trade without leverage, which means you can only trade with the capital you have available in your account.</p><p>Trading with leverage can magnify your potential profits, but it can also significantly increase your risk of losses. If you are a beginner or have a low risk tolerance, it is generally advisable to avoid using leverage.</p><p>Here's a breakdown of the options:</p><p>Trading with Leverage:</p><ul><li><p>Advantages:</p><ul><li><p>Amplify potential profits</p></li><li><p>Access larger positions with less capital</p></li><li><p>Increased market exposure</p></li></ul></li><li><p>Disadvantages:</p><ul><li><p>Magnify potential losses</p></li><li><p>Higher risk of margin calls</p></li><li><p>Requires stricter risk management</p></li></ul></li></ul><p>Trading without Leverage:</p><ul><li><p>Advantages:</p><ul><li><p>Lower risk</p></li><li><p>Avoid margin calls</p></li><li><p>Suitable for beginners and risk-averse investors</p></li></ul></li><li><p>Disadvantages:</p><ul><li><p>Limited potential profits</p></li><li><p>Smaller positions with limited capital exposure</p></li></ul></li></ul>

<p id="isPasted">You’ll only really ever want to use leverage when your personal risk tolerance exceeds your systematic risk.</p><p>Let’s take an example of a strategy that’s capable of producing a worst drawdown of 10%. If your personal risk tolerance is higher than that - say you’re willing to endure an account drawdown of 20% - then you can lever that strategy up 2X (calculated from 20% / 10%). Then when the strategy makes a 10% drawdown the 2X leverage in your account will turn that into a 20% drawdown.</p><p>You’ll need to have done all the statistical work upfront on the strategy, including valid out of sample testing and Monte Carlo testing to ensure your worst drawdown estimation is good in the first place. You certainly don’t want to end up in a levered position and the strategy drawdown blows out because your initial testing was flawed. That could make for a very bad day.</p><p>Finally, also remember the worst drawdown for any strategy is always out in the future. So always overestimate the magnitude of your systematic maximum drawdown expectation.</p>