Foreign exchange, or forex, can be defined as a network of buyers and sellers who exchange currencies at a pre-determined price. It is the process by which individuals, businesses, and central banks convert one currency into another; if you have ever traveled abroad, you have almost certainly done so. The question is, how can you start forex trading with $100? The procedure of opening and funding a forex account has become relatively simple in recent years. This can be done in a matter of minutes by using any of the broker’s payment methods. Following these criteria, you can trade forex with $100 after funding your account.
1. Money Management –
The first strategy is to trade while putting money management foremost. You will trade with no more than 3% of this money in total market exposure if you utilize this money management approach. This means you’ll only be able to trade micro-lots ($1000 is the minimum position size). You can only utilize maximum leverage of 1:30 if you have an account with a UK or EU broker. With a 3.33 percent margin, you won’t be able to trade under risk management limitations with an EU broker, since you’ll require at least $33 to trade 1 micro-lot. A brokerage in Australia and forex trading in South Africa or any of the other prominent offshore jurisdictions, on the other hand, can still provide leverage of up to 1:500. A micro-lot, on the other hand, would only require a $2 investment from the trader, keeping the position inside risk management parameters.
2. Risk-to-reward ratios –
The following guideline is about risk and reward. The risk factor refers to the Stop Loss (SL) setting, while the reward factor refers to the Take Profit (TP) option. For every 1 pip risked as a stop loss, you should aim to make 3 pips in profit. Using your authorized money management, which limits you to 1 micro-lot position, means that for every $2 utilized in the stop loss, you should be prepared to target $6. This translates to a TP of at least 60 pips and an SL of at least 20 pips.
3. Avoid News Spikes –
News transactions are extremely volatile, particularly in the initial few minutes after a news release. Your trades will be quickly stopped by the spikes and whipsaws. With such a small amount of money, you should avoid news transactions at all costs. Finally, you’ll need to focus on increasing your capital, but by that time, your $100 trip in forex trading should have effectively equipped you to trade larger amounts of capital responsibly.
Always keep in mind:
- When trading with a $100 trading account, keep your expectations in check.
- Risk management is still in effect.
- Look for a broker that sells micro-lots.
- Get your feet wet, but keep in mind that you’ll want to grow your trading account over time.
- If you can’t locate a broker who would trade nano lots with you, trade a lower timeframe with a smaller stop loss.
With knowing all of that, I hope you learned a lot on how to start forex trading when you have $100, I hope that JustForex helps you a lot with that information.