Compared to other financial markets, forex might be considered the most accessible in terms of start-up cash required. With a minimum amount of $100, it could be potentially open to just about anyone. However, there are many reasons starting with the minimum is not the best idea for long-term profits. Many seasoned traders would not recommend starting out with less than $500 in an account, but the final decision depends on how much you want to earn, your trading style and your ability to leverage.
Preparing to Trade Forex
Trading forex in your spare time can seem like the perfect way to increase your monthly income without spending a lot of hours at it. Well, for traders with a lot of knowledge and experience under their belt, that can hold true. But for a beginner, there is a lot to learn. This is true whether you’re considering trading part-time or considering it your full-time profession. Trading is not intuitive and it does not come easy, meaning that forex is not for the weak of heart! You must possess the determination required to dig in deep, understand all the terminology and practice before you leap head-long into your first trades. There are plenty of ways to learn, such as online courses, local seminars and following your favorite traders to glean their styles and methodologies. When you’ve practiced with dummy accounts, learned the ropes and have some savings set aside, it’s time to fund your own account with real money.
With as little as $100, a trader can begin with forex. Although it is possible, there are drawbacks to opening an account with the bare minimum. Of course much of this depends on your trading style and personal goals, but keep in mind that your possibilities for high profits will be very limited. The basic rule for day trading is to never risk more than 1 percent of your account on any one trade. If you have an account funded at $1,000, you won’t want to risk more than $10 on each trade. While keeping your risk on each trade to a minimum, there won’t be much chance of high profits with only $100 in your account. Your risk would be limited to $1 for each trade, which is 1 percent of $100. That’s why it’s better to begin trading with $500 or $1,000.
Keeping it Safe
The more money you begin with, the more flexibility you can realize with trades. Forex pairs trade in micro, mini and standard lots. But no matter how much you decide to start trading with, it’s a good idea to begin trading with a micro lot account. By trading micro lots, you will have extra flexibility while keeping your risk below the 1 percent mark. Another way to increase your entry level is by using high levels of leverage, which will give you a better command over larger positions.
However you decide to begin, the point is to not trade more than you can stand to lose. Take your own personal finances into account and begin with the minimum that is comfortable for you.