New traders, who may or may not have found currency trading by chance, would probably be the prime suspect for asking the question: can I trade forex with a small account? Not everyone can start trading with a big account. If you are a beginner, it is certainly better for you not to risk a big amount of money right away. Once a trader has done his or her homework, spent time with a practice account and has a trading plan in place, it may be time to go live – that is, start trading with real money at stake.
Start Small
No amount of practice trading can exactly simulate real trading. As such, it is vital to start small when going live.The start in forex trading is always better to be with small amounts, and of course, this has reasons. In the first place, starting with a small amount of money to trade gives some kind of inner relieve that the risk - if any – would be as small as you specify it.
Types of Accounts
Forex pairs trade in 1000, 10,000 and 100,000 units, called micro, mini and standard lots. When starting in forex trading, it is recommended traders open a micro lot account. Trading micro lots allow for more flexibility, so risk remains below 1% of the account on each trade. As the standard trading unit of currency trading is 1 lot ($100,000 position) with a standard account it is hard to trade with tight risk management if you don’t have at least $10,000 on your account. There are brokers who have dedicated accounts and trading vehicles designed for beginners and smaller accounts called mini accounts and mini lots (allowing small positions).
Leverage is the Key
You should specifically look for a broker that has comprehensive support for small accounts offering a good range of products with mini lots.
Forex trading is unique in the amount of leverage that is afforded to its participants. One of the reasons forex is so attractive is that traders have the opportunity to make potentially large profits with a very small investment – sometimes as little as $50. Properly used, leverage does provide the potential for growth; however, leverage can just as easily amplify losses. A trader can control the amount of leverage used by basing position size on the account balance. For example, if a trader has $10,000 in a forex account, a $100,000 position (one standard lot) would utilize 10:1 leverage. While the trader could open a much larger position if he or she were to maximize leverage, a smaller position will limit the risk.
Start Small to Grow Big
A trader needs to be good at trading a small account before they can move on to a larger account. I would even say that even if you do have a large sum of money to trade with, you should not fund your account with all of it until you have proved to yourself that you can make money on a smaller sum of money. Your focus should not be on turning a small account into lots and lots of money extremely quickly, this is simply not possible if you are managing your risk properly. Instead, your focus should be on becoming a good trader, not on making money super fast.
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