How To Have Fantastic Forex Trading With Minimal Spending
Posted on 2nd Jan 2017
How much capital you'll need to trade forex is one of the first issues you have to address if you want to become a forex trader. Which broker you choose, trading platform or strategy you employ are all important too, but how much money you start with will be a crucial factor in your ultimate success.
The amount of money you need to put in will also be determined by your goals. Are you looking to simply grow your account, or do you seek regular income from your forex trading?
- Start Small: It is important to be realistic about what you expect from your forex trading. It is often very convenient for newbies to start trading with paltry amounts. By investing little money and trading in mini lots, the trader not only gains experience in real Trading market, but also averts financial losses. Once you gain considerable experience, you can go to trade with bigger amounts.
- The one percent rule: Most traders jeopardise much more than 1% of their account on a single trade; this isn't recommended. It is possible for even great traders and great strategies to witness a series of losses. If you risk 10% of your account and lose 6 trades in a row you have depleted your capital and now you have to trade just to get back to even. If you risk only 1% of your account on each trade, 6 losses doesn't count for much. Almost all your capital is intact, you are able to recoup your losses easily, and back to making a profit in no time.
- Leverage: Leverage offers high reward combined with high risk. Since many traders do not manage their accounts wisely, the benefits of leverage are barely visible. Leverage allows the trader to take on larger positions than they could with their own capital alone.
- Stoploss: A trader can take many frequent small stops and try to gain profits from the few large winning trades, or a trader can choose to go for many small gains and take infrequent but large stops in the hope that many small profits will offset the few large losses.
- Education: The first thing you need to bear in mind is that you'll need to know somewhat about what you're doing. Whether you once had a decent forex trading account that crashed, or you are just a beginner with no experience, you will need to educate yourself on forex basics. Get initiated with risk management and other elementary forex concepts before you put any money to a trading account
- Invest Regularly: As you improve your skills, start investing from time to time. Add $5 or $10 a week to your account. Though it may not sound like much, regular investing, along with your gains added up can give you quite a significant account. You won't fritter away "the last of your savings" on a trading stunt that you thought was a sure thing.
- Be Patient: Forex is all about patience. Profitable investing takes time to learn. There isn't anyone that is good at it on their first day.
You can also use mini-forex accounts to test a Forex Broker and its trading platform. You can also check out other features they provide. Coping with risks and emotions also need practice, mini and micro accounts and mini lots allow this practice to be effective. The minimum sum may vary from one broker to another though.
Traders often fail to realize that even a slight edge such as averaging a one-tick profit in the futures market, or a small average pip profit in the forex market can mean sizeable percentage returns. Most traders enter the market undercapitalized, which means they take on excessive risk by not adhering to the 1% rule.
