Forex trading is profitable, and a lot of people would love to give trading a chance. But what if you have just $100 to deposit to a Forex account?
Is it possible to trade with such a small amount of money? Yes, it is! Here is a general guide on how to start trading with $100. The article gives a better understanding of how to trade forex with $100 what aspect to research to start trading.
A Forex $100 Trading Plan
One might assume that Forex trading, and trading overall, requires traders making rather big deposits. But in reality, anyone of us may start day trading with 100 dollars! Choosing to trade with just $100 can help you become a professional and successful trader in the future.
One of the reasons to choose to trade with a small amount of money is to get used to a market. Most likely, $100 dollars is not a big amount of money for people, so even when experiencing losses, it won’t hurt. So, if you are seeking a step by step $100 forex trading plan keep reading the article.
Step #1: Researching the Market
Before creating an account and figuring out where to invest, make sure to research the market. No one can expect to be successful when trading without knowing what to do. The Forex platform is one of the biggest markets out there, and it’s extremely competitive. Knowing more about the market guarantees an edge over those who trade mindlessly.
You may consider using the services of brokers, but it would be more expensive than using a spare $100. And avoid thinking of trading markets as gambling platforms — it’s based on technical analysis and even psychology.
Beginners have to get at least basic knowledge about currencies and what factors influence currencies to gain success within a market. The good news is brokers offer educational materials and tutorials for beginners.
Choose a good source of educational materials and try learning more about the Forex market. Consider researching one of the most important factors impacting the market — a market’s behavior. Keep reading the article to learn about two major tools which allow predicting a market’s behavior: fundamental and technical analysis.
Using Fundamental Analysis
The fundamental analysis focuses on the impact of the economy and related news on the market and currency. Each currency available on the market has its value. This value is determined by the nation’s or economy’s state and geopolitical situation. The currency is then compared with the currency it is quoted relative to.
When trading, check for these important factors related to a specific currency:
- Any major geopolitical news.
- Central bank monetary policies.
- Benchmark interest rate levels.
- GDP, or Gross Domestic Product.
- Employment statistics.
This analysis gives traders an edge on the market. Using fundamental analysis helps predict long-term trends that might be profitable. That’s why it’s important to research the potential market before investing.
Consider using a simple tool that announces economic events — an economic calendar. It lists upcoming events that may impact the market.
Using Technical Analysis
Individuals may use technical analysis tools like charts and indicators that give signals. It’s a common method to determine supply and demand levels that impact the price and, thus, revenue.
Take a look at exchange rate charts to identify patterns to evaluate the market. Some indicators are used to predict potential trends; others aim at finding entry and exit points. Overall, there are indicators and oscillators used for forecasting the market.
Here are some of the most popular indicators to use:
- momentum oscillators;
- moving averages;
- overbought or oversold indicators;
- volume figures.
Depending on a market, traders prefer using Relative Strength Index (RSI), Moving Average Convergence Divergence indicator (MACD), the 200-day moving average, etc.
There is also a way to determine how much activity accompanies a specific market behavior. For example, the trading volume offers an insight into a market’s behavior. Such an indicator as support and resistance levels enables determining the degree of supply and demand within different markets.
Even charts alone give some critical data as to how the market may behave so that you can act accordingly. A simple example is the system of candlestick charts created by Japanese rice merchants.
This system enables people to interpret informative charts to find opening and closing exchange rates, the range of a specific currency pair, and whether this rate is rising or falling. The information given is displayed for each separate chart.
Technical analysis is considered an objective method to analyze the market and make a decision. Day traders often use indicators to determine trends, exit and entry points to maximize profit. Consider finding tutorials and educate yourself on indicators since they are crucial to success on the market.
Step #2: Creating a Forex Demo Account
One of the most interesting peculiarities of the Forex market is its demo account. It has the same function as a real account, but it does not require deposits.
You may set up a demo account even on such popular platforms like MetaTrader 4. You can use this platform since it has several indicators implemented into the system. The demo account will comprehensively show you how to use trade on the market without any losses.
The reason to at least try and use a demo account is to develop an understanding of how the market works. You may use various combinations of indicators to see how they work.
It’s a well-known fact that indicators work better in combinations to prove that signs are true. So consider checking how these indicators work before investing money.
Another thing to do is to learn how to take risks. The demo environment works as a real market, so consider your reaction when dealing with profits and losses.
Soon after opening a demo account, start developing a trading plan. It’s OK to lose virtual money, and it might be beneficial in the future. Losses and wins give a better insight into how the market behaves. Use online educational resources to figure out a successful plan to apply it within the real market then.
Step #3: Funding the Account to Start Trading
Upon developing a successful trading plan and getting enough confidence to trade, create and fund a real account. It’s possible to start with just $100. The very first thing to prepare for is to consider emotional swings.
It’s not a demo account, it’s a real account, and a loss means a loss. The good news is that it’s possible to apply a trading plan and use only a small amount of money to trade in micro-units or 0.01 lots.
Such a strategy helps with increasing the initial capital. But as you get more confidence, avoid taking too large risks.
Another good precaution is to consider trading only one currency pair. That way, it’s more likely to get control over funds and avoid losses. Currency pairs are different, and it’s difficult to control losses when you are a beginner focusing on everything at once.
Successful traders recommend considering EUR/USD pairs as it’s highly liquid and has tight dealing spreads. It’s one of the most popular pairs and offers a wide range of economic news to predict trades’ outcomes easily.
That’s why it’s a good idea to use this pair to start trading at $100. It guarantees a steady income, and it will be possible to consider other pairs in the future.
Step #4: Minding Your Budget
For some people, trading $100 allows them to invest and start the journey easily. But it’s critical to keep track of investments. It might be tempting to raise a budget when successfully getting profit, but it could also end up in bad trades.
Whenever someone raises their budget too much, they become more emotionally invested. Forex market had a lot of traders who couldn’t keep their cool and made bad decisions because of fear of losing everything.
So, it’s best to set a plan of how to invest. Consider funding the account every month or a quarter. Add smaller amounts to get used to the stress of losing money. h
And remember, trading is a tricky business. It’s possible to lose the entire investment. Consider reinvesting what you gained since it seems easier to lose something you didn’t actually have.
Advantages of Trading Forex with $100
It’s worth mentioning that Forex has only recently opened the market to individuals who want to spend less money. It’s beneficial to use a small amount of money since in case of any failures, there won’t be any serious losses.
However, individuals should be ready to manage risks, use indicators, and work hard to increase profits. Here are some of the benefits of trading with $100:
- Fewer risks and less stress when losing $100. It should be easier in the future to learn how to avoid bigger losses.
- Gaining experience. Trading occurs within a real market with the psychological pressure of losing money. That way, it’s possible to train oneself to resist any stress and judge the market with a cool head.
- Creating a successful strategy. Individuals can figure out what trading strategies are best for them. More on strategies further in the article.
- Figuring out the best indicator combinations.
It’s true, getting profit from only $100 is not an easy task. It will take a long time to develop an account. But it’s also an advantage. While increasing profits, individuals learn how to control their emotions, what indicator combinations to use, and what trading style they enjoy.
Here are the three main strategies to use when having only $100.
- Day trading. It is focused on the market’s opening and closing, so during the same day. It’s beneficial since traders have more chances to react to events on the market. Thus, individuals have more chances to gain profit relatively quickly.
- Swing trading. It doesn’t require closing the account when the trades are over. Individuals can expect profits from long-term trades. It will require patience and understanding of the market.
- Scalping. This strategy requests getting multiple short-term trades. As a result, individuals gain lower profits from trades, but in big numbers a day.
Paying only $100 is a great way to test these strategies without experiencing stress.
Final Thoughts on How to Trade Forex with $100
As mentioned, it will be a tough journey to get a profit out of $100. But having a small amount has its benefits, as described in the article.
You learn how to analyze various worldwide events which have an impact on the market and thus make profitable decisions. Learn from experience how to use indicators, stop-loss tools, etc. Figure out what trading style suits you, and you may start investing more and getting significant revenues.