Start trading forex with a small amount 7


There might be numerous reasons for someone to start trading with small capital even if he or she could afford to begin with a larger sum. Getting the feel of live trading is often an exciting but costly endeavor. Having the opportunity to trade small gives you a great head start to overcome the inevitable mistakes that a new trader makes. Although demo trading helps, live trading is a different class. Psychologically it is a whole other dimension and that is true even with the smallest amounts not to mention if you trade with a significant part of your wealth.

Nowadays, it is possible to start trading literally with no money with the help of some of the account opening bonuses that are available. While these promotions are often subject to conditions they can offer great value for the novice trader.

Mini accounts, high leverage, and the said bonuses mean that if you want to open an account with $1000, $500, or even $100 dollars you won’t have a problem with the right broker. It’s hard to say that what is the ideal amount of capital to start with, so let’s look at the main issues that can come up with small accounts!

The role of leverage

Probably the biggest question is how to handle leverage. With small amounts and high leverage even the smallest mistake can cause your account to go to zero. Why? If you do the math with 50:1 leverage and full position it takes a movement of 2% to wipe out your capital. And 50:1 is not the highest available margin by far. The same calculation leads to 1% with 100:1 and 0.1% in the case of 1000:1 that is still available at some companies.

That’s not to say that leverage is bad—it can be a really useful with certain strategies, but traders, especially beginners, need to understand the limitations of leverage besides the opportunities. Even with successful strategies, you can get wiped out easily when using leverage as it magnifies moves, for example, price spikes around news announcements.

Dedicated accounts for small sums

The first thing you need to know when you plan to open a small account is the minimum trading size that a broker offers. To understand that, you should know that a “normal” size in forex trading is $100,000 (or 1 lot as it is often referred to). Commissions, fees, and bonuses are determined by “lots traded” in a lot of cases.

Now, luckily, this doesn’t mean that you have to trade with at least $100,000. Most traders offer smaller sizes as low as $100. For most strategies the minimum amount of $1000 should be enough, as that means a 10:1 leverage even if you start trading with just $100. That is manageable when trading currencies as a 10% move (which would mean you get wiped out) is a massive move in forex.

Sometimes there are so-called “mini accounts” offered by brokers. These can be really helpful not just because of small sizes but equally small costs and commissions.

So this should be the first condition when choosing a broker—to be able to trade small.

Commissions and fees

It is easy to understand that if you have the opportunity to trade small but fees are much higher in contrast to “normal” trades, you will have a much harder time to be profitable. So, be aware of fixed commissions or minimum commissions/trade—they might be unrealistically high for small sizes.

The same goes for account maintenance fees. There are many brokers without such costs so try to choose between them, otherwise, your account will suffer from the relatively high fees.

Now that you know what to look for here some brokers that we at FXUniversal would recommend for traders who want or have to start with forex with a small amount.

How to trade with limited capital?

The next thing to decide is what strategy to follow with a small account. There is no perfect answer to that but generally speaking, higher risk strategies work better with small amounts. Why? It’s because of the relative costs of trading and holding positions.

Taking higher risks doesn’t mean risking your capital without limits. It only means that your trades will be, more concentrated than they would be in the case of a bigger, more diversified account. This is just common sense as you simply don’t have the choice to have multiple positions if you only trade with $100 or $1000.

The obvious approach is to use technical analysis for day trading or scalping positions. Short-term trades give you the flexibility to avoid major news releases with unwanted consequences or on the contrary trade them intentionally. The crucial thing is that you should trade consciously meaning you need to apply stop losses and be disciplined about them—you can’t afford the luxury of letting your losers run (you shouldn’t do that at all even if you have a lot of capital…).

The good thing is that if you succeed with a small account you are more than likely to be profitable later on. This is why it can be a good idea to start with less capital than you could afford and if you are successful with that take the next step and raise your account.

We at FXUniversal believe that it is possible to be successful with mini-position, but let us know what your thoughts are on small accounts and sizes, and how do you trade with limited capital!

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7 thoughts on “Start trading forex with a small amount

  • Kitkat

    This article is very informative. I know a lot of traders who are very good in managing small accounts but when they trade large sum accounts, they panic and suffer losses. These kind of traders produce very good results if they are trading in accounts less than 1000 USD but when they trade an account of size like 5k they start doing stupid mistakes. It’s easy to double small account less than 1000 USD but only professional traders can manage big accounts. In the last few years, forex trading on mt4 became very popular and there are 100s of brokers in the market which are offering services to traders. They allow traders to open accounts with small amounts and also give very high leverage, so some new traders start with small amounts and they take big risks and most of the time, they make good money in these small accounts but as soon as they deposit large funds, they start losing money. I never recommend leverage more than 1 to 100 but nowadays some brokers are offering leverage upto 1000. Well, such high leverage is very dangerous for your trading. What I know is that professional traders never use leverage more 50. If you want to learn trading better, you start with a small amount and you can use high leverage on small accounts but for accounts above 5k never use leverage more than 100. if you are comfortable doing trading in small accounts and make money using your trading strategies then it is better to open multiple small accounts instead of big one account.

  • Forex Gladiator

    Nice article and I agree with most points made in the article. One should start trading with small accounts even if they can afford a large account. The reason why small account is better when someone is new in trading because this helps to develop your strategies and choose right broker for yourself before investing large amount and when you understand how to handle small account and develop your trading strategies then it makes no difference whether you are trading in a big account or a small account as you can handle both types of accounts. Leverage plays very important role in your trading and you should be very careful while choosing leverage. I use high leverage like 1 to 20 when I day trade but when I do swing trade I not choose leverage more than 1 to 5. Maybe for some people, this is much less leverage but I am very satisfied with this and make profits in my trading without much risk.

  • TJ

    One of my friend is a master in managing small accounts like accounts between 500 to 100 USD. He gives very good results while managing small accounts but as soon as someone gives him a bigger account like 5000 USD he’d be unable to manage that account. This shows that there are some people who can only manage small accounts so I think if you comfortable doing trading in small accounts then you should probably stick with this. Also nowadays markets are very volatile for instance the gold movement of 20 to 30 points daily is a normal thing. When I started trading in 2001, the average move in gold was 5 to 7 points but nowadays we can see so much volatility in almost everything which I think very risky. Also these days there are 100s of brokers in the market and some of them are very ill-regulated or follow no regulations at all and also most brokers these days do not offer negative balance protection. This is why it is better you do trading with small accounts and deal with more than 1 broker at a time.

  • James King

    I have been in forex trading for almost 15 years now and when I started forex trading you could only do standard lot. But in last 10 years, so many options for you have been offered by the brokers. Now you can even trade micro lots in currencies. In our times no one could imagine to open account for less than 5k to 10k but now you can open account even with 500 USD and make good money because of the option of trading micro lots. I now feel very good because I am handling multiple small accounts and I trade micro lots and it gives me room to hold my trades for long time both in loss and profits and I am making some very good money because of these small accounts. I have developed some very good trading strategies for small accounts and so far I am very successful in my trading.

  • Slid4949

    Majority of traders using mt4 are small investors. Few years back forex trading required good funds and margins were huge too especially in futures trading. But after the arrival of mt4 platform and so many new brokers, now it’s possible for small investors or people who have limited funds that they can start forex trading with few hundred dollars. Now if you are good in trading you can turn your small investments into big. There are a lot of examples of people who have turned their small accounts into large amount. So nowadays lack of funds is not excuse for not making big money. If you are good in trading you can turn your small account into big account within short time.

  • bluestone

    I remember the days when maximum leverage was like 1 to 50 or 1 to 100 but now some brokers are offering as high as 1 to 1000 and because of such high leverage you can trade with small capital in forex market. It is quiet risky but if you are disciplined and trade according to your plan than you can earn even with small capital. I agree with above point that some people are very comfortable while handling small capital but when they try to trade big capital they fail. My advice for those people is to remain trading with small capitals.

    • FC Fan

      It’s funny how some traders are very good at managing small account but as soon as they start managing larger account they become a total failure. The reason of this is improper training because forex trading is a serious business and one really needs some great skills to reach on top. I know some plumbers; some carpenters become fund managers and are now teaching people trading. These days anyone who fails in other business or job becomes forex trader. Initially they do start making some profit in their small account but these people can never manage larger accounts. The reason is that you really need proper education about risk control and management to become a successful fund manager and capable of managing larger funds. So if you are not well trained or educated in forex trading then my advice is to either stick with small accounts or get proper training.