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How to trade Forex with $100 - 2020 guide
Everyone can profit off currency trading, but not everyone is ready to invest their entire fortune into the process. Luckily, we currently have access to numerous tools and approaches that allow trading on the foreign exchange market with a minimum initial deposit. Our question today is how to trade Forex with $100?
How can I day trade with $100?
The very first thing you will need to settle on when considering trading with a small amount is what strategy to implement. You already know that there are literally hundreds of available trading methods out there, which means that some of them exist specifically for trading with low initial investments.
Strategies that focus on processing small trades and close all positions before the day runs out - are the ones you might want to focus on, if $100 is all you have. Day trading, for example, has a very clear perk of avoiding swap charges and, therefore, preserving a larger portion of the account balance.
Day trading, scalping and some versions of swing trading are all very suitable for anyone who wants to learn how to trade Forex with $100. Your job is to first, make sure that you are choosing the right approach that does not contradict with your preferences or capabilities. And second - that you know everything there is to productively use the chosen strategy.
To correctly evaluate, which strategy will work best for you, figure out what kind of trader you are. This will cover things, such as your day-to-day availability to monitor and trade on the market, your learning speed and style, your analytical thinking capacities and your level of stress resistance.
For example, day trading is great for those who do not have too much time on their hands. Day traders often focus on one single position per day and gather all their resources to make it right. But on the other hand, while the trading itself does not take up too much time, the analysis process can become a lot. This way to make one small trade, you might need to spend hours analyzing the market scene and evaluating your risks.
And if the market is too volatile, sometimes the nerves take over and do not allow traders to think clearly and make rational decisions. So, as you can see, choosing a strategy can be challenging, but it is very important to your overall success on the foreign exchange market.
Take advantage of available learning tools and resources, offered by your broker to find out every little detail on the trading method you are interested in. It’s also always a good idea to give every strategy a whirl, using a demo account for currency trading. On demo, you will see the strategy in action, without risking any money.
How much can you make with $100 on Forex?
Now, the strategies vary in style and techniques as well as they might have different targets. That’s right, “making profit” is not a valid goal. A smart trader needs to understand how much they are planning to make, how much time can it potentially take and what are the knowledge and resources they will need in the process.
A trader who wants to turn $100 into $1,000,000 over the course of one week is probably not getting anywhere. Every goal has to be realistic, before anything else. But how do you know how much to aim for, if you are new to trading on Forex?
Many factors contribute to a trader's success. They include knowledge of the market in general and of many trading aspects in particular, skills and techniques, that a trader has either worked out through practice or actual trading and, of course, the current market situation.
Forex market can move at various speeds and bring out a selection of choices and paths for the traders. It’s also important to remember that trading can be referred to as a zero-sum game: while someone is winning, someone is equally losing. Obviously, you want to always remain on the winning side, but that’s not always going to be the case and it is crucial to accept this fact in order to become truly successful.
There is no one particular answer to how much you can make on Forex with $100, because there are just so many contributing factors and variables. What we do know, however, is pretty much every trader comes in with a decent amount of potential. In other words - absolutely anyone can be profitable on Forex.
And as we have already mentioned, different profit goals require different levels of effort and different measures. As an example let’s look into the possibilities of making $10,000 from $100, including what you will need to consider doing so.
The prospects of turning $100 on Forex into $10,000
To address this particular scenario of growing your initial $100 into $10,000 we are going to consider two crucial aspects: theory and probability. Additionally, it is important to look at the very common way to measure success on Forex - time.
For a clear example, let’s picture that we have one hundred trees, and we have a task of growing a large forest, with a total count of ten thousand trees. In theory, it is completely possible, as long as we take into consideration what particular type of tree we are working with and how much time we have to do so. Will a large forest appear in 1 year? No. What about 10 years? Maybe. But even then we have a number of factors that might interfere with the process.
Same applies to Forex trading - in theory it is possible to grow an amount as little as $100 one hundred times in, let’s say, one year, but in real life this will most likely not happen, due to market’s behavior, economical, political and social events and so much more.
Now, if we add another zero to that initial hundred, the chance to achieve the ten thousand goal becomes far more believable and achievable. So, by this logic, our initial deposit has to be proportional to what amount we are ultimately aiming for. For a trader who is looking to start with $100 it would be wise to focus on growing it at least double at first, before looking into larger opportunities.
Just before we wrap up, let’s imagine what will actually happen if you do choose to trade with just $100 and decide if that’s such a good idea after all.
Trading scenario: what happens if you trade with just $100?
At this point we know that trading with just $100 is possible, but is it wise? To answer that we will need to consider the possible outcomes of such a decision.
Depending on your agreement with your broker, you will have different levels of margin calls and stop out levels. Those two exist to make sure the trader has enough money to participate in the trading process. Margin is the entire account balance that can be separated into used margin - money currently involved in trading and free margin - money that remains intact. Stop out will happen automatically, when the current trade can not progress under the same conditions.
Based on how correct your analysis was there are two possible scenarios, when you trade with just $100 on your account. First scenario is when the market goes in the direction you need and you successfully close the position after gaining several dollars. And the second scenario is the market goes in a slightly opposite direction and the hundred gets blown through in a matter of minutes.
It is simply explained by the fact that the more the price goes in the opposite direction the more resources are required to keep the trade open. The lower is the margin level, the higher are the losses, and vice versa.
Unfortunately, we never know for sure which direction the market will go into next. But when it takes a turn to go against us, we can choose to turn with it and benefit from every possible scenario. Provided, there is enough money to do so in our account. Because if you only deposit a hundred at a time, you will lose a lot of precious time on processing the transactions and not trading.
Is it possible to start trading with $100? Totally. Is it going to be as effective as trading with $1,000 or $5,000? Definitely not. Everything is possible at the Forex market, but you still need to remain realistic and reasonable in terms of your goals and expectations. You can absolutely try to start your trading journey by investing a small amount, but you also need to be prepared to lose it very quickly. Bottom line is, each Forex experience is unique and you write your own rules as you go along, just make sure you are making your decisions not based on greed, but based on thorough analysis and calculation.
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