Start Forex Trading With $100: Myth or Reality?
There is a popular belief among traders that you can start Forex trading with a little amount of money and become a multimillionaire in just a few weeks. But is it really so?Oreoluwa Fakolujo Forex Trader & Writer
Well, in reality, this is highly unlikely. In fact, research shows that 95% of retail Forex traders fail to succeed, and 80% of them quit after several years of consistent failure.
So, you might start wondering: “Does that mean I can’t trade Forex without having a fat bank account of at least $1000? Can’t I grow my Forex account from a little amount to millions, maybe not in weeks, but in years? Can I at least start trading Forex with $100?” And we’ve got the answers for you. Let’s get into it!
Can You Start Trading Forex With $100?
Simple answer: Yes, you can. But your broker has a big say in this.
It All Depends on Your Broker
There are countless Forex brokers today. And many of them offer four Forex account types: Standard, Mini, Micro, and Nano. And each of these accounts has a maximum amount of units you can trade.
In an ideal trading world, a lower-unit account should not be allowed to trade lots that belong in the higher-unit accounts. This allows small money account owners to preserve their accounts for longer. And it is for this reason that nano and micro accounts are usually reserved for only small money accounts.
|Number of Tradable Units
But we’re not in an ideal trading world, and some brokers allow you to push your lots as high as you want, regardless of your account type. Some brokers would even allow you to start trading Forex with $10 on a standard lot account. And if you look hard enough, you’ll find brokers who have a $1 first minimum deposit.
Imagine trading a standard lot of EURUSD on a 100 dollar account where 1 pip equals $10. You would only have to lose 10 pips before your account runs into the ground. And this all could happen during just one trade.
The Advantage of Trading Forex With a Small Deposit Account
The major advantage of trading Forex with little capital is that small accounts are ideal for learning. There is an extent to which you can learn using zero-risk demo trading accounts. Since you’re not risking your actual money, your emotions might not influence your trading decisions so much.
However, it’s very easy to fool yourself into thinking you have your emotions in check until you start trading real money. That’s why we advise retail traders to first start with small deposit accounts before investing significant capital into Forex.
Cons of Trading Forex With a Small Deposit Account
Here are some of the challenges you might face when starting Forex trading with a small deposit account.
There is little room for error. A small account won’t accommodate a lot of mistakes before its balance runs out.
Small deposit traders are particularly prone to psychological mistakes. Imagine the psychological pressure you’d be under, when you know you are only a couple of trades away from blowing up your account. It would be easier to make irrational decisions this way.
There’s a limit to the assets you can trade. You can only trade low-margin markets with small deposit accounts. You wouldn’t be able to trade other assets, including exotic currency pairs.
How to Trade Forex With $100?
Trading forex with $100, $50, or even $5 is possible. Here are the steps you need to follow.
1. Understand the Market
It makes no sense to attempt and make money in a market you don’t understand. Especially, if it’s a high-risk market like Forex. You might get lucky the first time, but your luck will run out soon enough. The trick is to focus on understanding the market, not the money you may earn there.
There are many important things to know before you start trading Forex. Learn what it means to buy or sell in this market. Top it off with the knowledge of pending and instant orders.
Understand the scope of Forex leverages and how to use them to your advantage. Learn about spreads, quote and base currencies, and many more. These are the basic tools you need to get started in the market.
Here’s another important topic you should get acquainted with: Why you need a trading plan before entering any trade.
2. Master the Art of Forex Analysis
There are two major kinds of analysis in the Forex market. The first is the technical analysis, and the other one is the fundamental analysis. The fundamental analysis makes use of news reports to predict price movements. Technical analysis uses lines, patterns, indicators, and other technical tools to predict price movements.
Neither of these two types is better than the other. You can learn one of them and still have a stable Forex account. But you may be better off learning both fundamental and technical analysis to help reduce your risks and maximize your winning potential.
3. Demo Trade for Long
Brokers offer you demo trading accounts to allow you to trade the live Forex market without investing real money. It’s a zero-risk account. Demo trading account is where you can put everything you’ve learned into practice, and still learn a lot of new things. You can also develop your own strategies and find out things that work for you.
4. Master Risk and Emotion Management
You must learn to master psychology and risk management. Without this, you could have a $1 million account and still blow it up in a matter of seconds. Risk management keeps you in check, so that you don’t incur more losses than you should.
Concentrate first on not losing too much money before you even think of making a profit. So, for every given trade, make sure you don’t risk more than 2% of your account. On a $100 account, risking 2% on every trade means you would have to lose 50 times before your account balance reaches zero.
Managing your emotions is also a crucial thing you need to learn. Your emotions stop you from making smart and logical decisions that would preserve your account.
5. Avoid Aggressive Trading
You have a small account. The distance between your capital and zero is very small. Reckless, high-risk trades are not for you. Instead, trade conservatively. Don’t make too many trades at once. Stick to having a maximum of two or three trades running at any time. You may use a trading journal to keep track of your past and present trades.
Should You Start Trading Forex with $100?
Trading Forex with $100 is possible. Many brokers allow you to do it. But should you start Forex trading with $100? This is where things get tricky, because now we have to consider many factors, such as profit potential and how long it might take you before you start making a consistent profit. For many Forex traders, this takes years.
This is what we recommend: don’t trade Forex with $100. And here’s why.
We advise that you only trade Forex with the amount you are willing to lose. That’s an amount that wouldn't affect your livelihood if you’d lost it. Meaning that you can still pay your bills, take care of your children, and do other necessary things after losing this amount.
But, if all you can afford to lose after you settle all other expenses is only $100, you’re most likely better off taking some more time to save up more money for the trading business. You don’t have a big enough budget to begin with. And you might be aggressively reluctant to lose even a penny from the little money you already have.
Losses can mess with your emotions and ruin the very account you're trying to preserve. And with Forex, it’s absolutely impossible to not lose any money.
Now, assume you have a 1000 dollars that you can afford to lose after you have covered all your expenses. This puts you in a better position to make more rational decisions. After all, you have enough to lose up to a 1000 dollars. So, your emotions might not interrupt your trading as much as they would have, if you’ve had a 100 dollar account. But if you don’t have up to $1000, you might want to try it out with $500.
Here’s another article that you might find helpful: How to become a successful forex trader.
These are some of the most frequently asked questions that pertain to trading Forex with low capital.
Is it possible to generate a large income from Forex starting from 100$?
Yes, it is. But this may take a long time.
Can you start trading Forex with no money at all?
No. You need money to make money.
Can I start Forex trading with $10?
Yes, you can. Some brokers allow you to do that.
How many lots can I trade with $100?
$100 is already a small capital, to begin with. Trade only 0.01 lots. And even then, it’s still very risky.
Can I day trade Forex with $100?
Yes, you can. But please keep in mind all the rules we’ve mentioned in this article, since they apply to you in this case.
So, can you start trading Forex with $100? Yes, you can. But should you start trading Forex with $100? No, you shouldn’t. The choice is yours to make.Oreoluwa Fakolujo Forex Trader & Writer