FX Trading with a Small Account
FX trading is certainly not easy, and it can be extremely intimidating for newcomers no doubt. That being said, there is a certain difference between FX trading with a small account and a large account. People who start trading and already have substantial cash to work with tend to have it much easier. However, if you start FX trading with a small account, you are faced with much larger challenges, more risk, and so much more.
No, FX trading with a small account is no easy, nor is it fun. However, that said, if you don’t have much cash to spare, but you still want to trade Forex, then you have no option but to start with a small amount. Now, although FX trading with a small account does pose some challenges, it’s not impossible. This is what we are here for today, to provide some crucial tips and insights on how to start trading Forex with a small account balance.
FX Trading with a Small Account
Before we get into the advice section of FX trading with a small account, let’s define exactly what a small account is. For today’s purposes, we would say that any account with a balance less than $1,000 qualifies as a small account, with anything under $500 being exceedingly small. Sure, technically speaking, any account under $10,000 is usually considered quite small, but that said, you might just not have that much cash at your disposal.
What is also important to note is that FX trading with a small account is much more demanding and difficult than doing so with a large account. If you have a lot of money to spare, a single loss, even a large loss, might not make a big difference due to having such a large buffer zone. However, when it comes to FX trading with a small account, due to limited funds, a single loss can spell disaster and wipe out your whole account.
Tips for FX Trading with a Small Account
So you can be successful when FX trading with a small account, so you can grow your account exponentially, here we have some crucial tips that you absolutely must follow.
The Rule of Risk
Perhaps one of the most important tips to follow when FX trading with a small account is to never risk too much in a single trade. Most day traders stick to the 1% rule, which means not investing more than 1% of the total account balance into a single trade. This way, even if a trade is lost, you only lose a small amount of your total balance. Now, if you only have a couple hundred bucks, you might need to push that number a little higher, but as low as you can go is usually the best.
Something else you can do when FX trading with a small account, especially to grow it quickly, is to leverage trades. For example, if you leverage a trade by 100:1, it means that you can trade with 100 times more money than you actually have. So, if you want to place a Forex trade for $100, if you leverage it by a factor of 100 to 1, you only have to put up $1. It lets you trade with a lot more than you actually have. Now, speaking of risk, beware that if the trade is lost, you will be on the hook for the full $100.
Using Stop Loss & Take Profit
Yet another crucial tip when it comes to FX trading with a small account is to always take advantage of take profit and stop loss. Sure, everybody sets these, but the fact of the matter is that the less money you have, the more important this becomes. Here, you want to set relatively low take profit levels and relatively high stop loss levels.
Therefore, if you enter a trade and it goes south, you will only lose a minimal amount of money while being able to recoup the majority of money which would have otherwise been lost. On that same note, setting your take profit level only slightly above the level of initial investment will allow you to bank money. Sure, the profits will be small, but small profits are always better than any losses.
Choosing the Right Forex Pairs
The other piece of advice that we have for you today is that you should always stick with relatively safe Forex pairs, especially when FX trading with a small account. Yes, there are certain Forex pairings which are more reliable to trade with than others, safer and less risky. Some of the best currencies for beginners with small accounts to start off with include the Euro, the Swiss Franc, the Japanese Yen, and the US Dollar.
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FX Trading with a Small Account – Final Thoughts
So, if you plan on FX trading with a small account, you absolutely need to follow the tips which we have outlined above. Folks, there is no shame in starting out small, and many people have to do so. Yeah, we all have to start somewhere, but this does not change the fact that FX trading, even with a small account, can be lucrative.
The trick is to do it right from the beginning, so you can grow that small account into a substantial one, and then start trading with larger amounts of cash. To really hone your FX trading skills, we would recommend taking a course, one such as the Income Mentor Box Day Trading Academy. This is a full scale and affordable Forex trading school that will teach you all of the skills you need to grow that small trading account into a substantial one.
When all has been said and done, we are here to help keep innocent traders away from tools that will cost them money, while also providing tips and insights as to how everybody can make it big in the world of Forex trading.