It’s not clickbait. You’re literally at the place where you would genuinely learn how to start forex trading with just $100, what’re the opportunities lies for you, and what you can’t literally do with that $100.
However, unlike any other financial market, forex is a market for everyone. You can start trading with just $100. As forex is a leveraged market, your initial investment can rise by 20/30 times and sometimes even 500 times when you take them. Many people feel interested in trading forex because of this golden opportunity. However, even if you have access to leverage of 1:500, trading with $100 in the forex market has its own set of challenges and restrictions.
What you can’t do with $100 in forex trading?!
Though you may start trading with only $100, there are certain things that you can not do with that little $100.
- You can’t quit your work and become a full-time trader with just $100. It might be a good idea to start trading with that money, but you won’t be able to make a living off of it. There are countries where a daily rent of $100 is unaffordable. Even if you earn $100 a day investing $100, you will not be able to survive living in those countries due to additional costs.
- You can not make your $100 to rise up to $10,000 or $1,00,000 within a month. We know you’ll be seeing ads from different forex service providers influencing you saying that it’s possible with some unrealistic binary equations. We would like to confirm and assure you that, It will not happen.
- You won’t become Warren Buffett or Donald Trump overnight by starting with $100 and expecting to be rubbing shoulders with them with your monthly trading profit.
What you can do with $100 in forex trading
Unlike the restrictions, there are also a number of learning opportunities that lie in the fact of starting trading with $100. Here, we’ve listed the positive things that you can do for $100.
- You can learn money management starting with $100. Imagine a situation where you are left with only $100 to live with, would you be gambling away the money or would try to make best use of the money you have. You would certainly choose to make the best use of it. So, why can’t such mindsets be applied to the field of forex trading? Things are really the same in forex. You’ll figure out how to make the most of what you have.
- You can use your $100 forex account to make the transition from demo trading to real trading more smoothly. There are many people who start trading in real accounts with a large amount of money right after completing demo trading. This is never a wiser decision in transition. Real trading is different from a demo account, in a real account you’re risking the money putting down to the broker’s desk, where the broker is reselling the position to your right from the interbank market with real money.
- Trading with $100 will teach you how to control your emotions. Make sure you’re comfortable trading with real money before you start. You should not put yourself in a position where you will be sleep-deprived; rather make yourself get used to facing situations with real money.
How would you start forex trading with $100?
To start, you need to have a trading account first. The process of opening a forex trading account is no longer time-consuming; it can now be done in minutes or hours using the device in your hand, and payments can now be made online. Following the guidelines below, you can trade forex with $100.
- Money management:
The first method of starting to trade with $100 is to learn and must have money management. The money management method is that you will trade within the 3% of this money in the market exposure. This apparently means that you can only trade in micro-lots; minimum position sizing of $1000. In case you hold trade with an EU or UK-based broker, only then you can use maximum leverage of 1:30. With a 3.33 percent margin, you won’t be able to trade under risk management restrictions with an EU broker, since you’ll require at least $33 to trade 1 micro-lot. Anyway, brokers from Australia, South Africa, and other off-shore jurisdictions still offer leverage up to 1:500. In those cases, a micro lot would need just a $2 commitment from the trader, which would keep the position within allowable risk management limitations.
- Risk-reward ratios
This risk and reward is a method where the risk refers to the Stop Loss(SL) and reward refers to the Take-Profit(TP). For every 1 pip risking at the Stop Loss(SL), you must target to gain 3 pip in profit. Using your allowable money management, which limits you to 1 micro-lot position, means that for every $2 used 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.
This requires extra care while choosing your trades. Only join trades with a high probability of success, and target your setups with well-defined support and resistance criteria. Some chart patterns, like the flag and pennant, have defined profit targets, and the pattern boundaries can also help in defining the stop loss.
- Avoid the News Spikes
News trades are extremely volatile, particularly in the first 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 trades at any and all costs.
Finally, you’ll need to focus on increasing your capital, but by that time, your $100 experience in forex trading should have effectively equipped you to trade larger amounts of capital responsibly.