Here you will learn how Forex Trading works, which mistakes you must avoid, and how you can start with a small start-up capital.
We start with a positive message. We live in the age of digitization. Why is this important for the Forex trading?
Because we have optimal conditions for Forex Trading with little money through the rise of the Internet and the associated expansion of Forex Trading.
The Forex trades have become very popular amongst private traders and those who want to be.
In only 5 minutes I can become a Forex trader. How do you find this in the course of the article.
But before we arrive at the relevant amounts and the starting capital in the Forex trading, we first clarify what exactly happens in Forex Trading.
Why is there forex trading and what are my chances?
In Forex Trading, two currencies are traded against each other. That's why you always see two currency rates before the price. With the abbreviation EUR / USD, we trade EUR against USD. The volume notation EUR / USD 1.1400 means that I get for 1 EUR = 1.1400 USD.
From the point of view of history, currency trading offers the possibility of transnational trade. If two trading partners have different currencies, the exchange can still import and export goods. Of course you have to agree on a price.
Monetary trade plays an important role in the context of globalization and digitization. Both companies and private individuals need access to these foreign exchange rates. It is important to maintain a fair exchange rate.
Unlike for equities, the exchange rates are not placed on a stock market but on the interbank market. This means that a pool of several investment banks provides the courses.
We look at the graphic from right to left. Various investment banks provide courses for the forex pairs. The broker takes the "best" price and passes it on to the trader / customer with spread. A more detailed explanation can be found here if necessary.
Apart from internationally active companies and private persons on vacation travel, the Forex trading offers another benefit: the attractive possibility of speculation. As daytrading or swingtrading, traders can make profits from the movements of forex pairs.
To start trading in Forex trading, we need an account with a CFD & Forex Broker.
Fortunately, the competition among local online brokers has risen significantly in recent years. High competition generally ensures a rising quality and low prices.
Especially the Forex trading offers very favorable conditions, since it is a very liquid market. The liquidity ensures that current positions are bought and sold, which reduces the risk for all parties involved. Please remember that, unlike stock trading, the Forex market is traded 24 hours from Monday to Friday. There is only one booking cut at 23:00 hours of German time, during which the daily result is captured. Often an increase in the spreads is noticed at 23:00.
Due to the aforementioned liquidity and the associated favorable conditions, it is now possible to start forex trading with little money. How do we look at it now?
Forex trading with low starting capital
The first good news: You can open a new trading account in 5 minutes.
The second good news: You can start the Forex trading with less than 100 EUR. With GKFX, there is no minimum payment.
Before you deal with your real money, you should practice over a week or months with a demo account. The demo account is also free and has the advantage that you can work under real conditions with money. This allows you to get used to the broker's trading platform and learn which positions you can trade.
Often, beginners ask me if Forex Trading is so useful with so little money at all.
Yes, it is useful to start with small amounts in the Forex trading. Just beginners tend to open a position without risk management somehow and then wonder that the first 1000 EUR are gone after 3 minutes.
On a demo account is quite okay, on the live account (with own money) it is naive and grossly negligent. In the first "right" trade, I need to know as a trader which position size suits me.
Which position size I choose with a small trading account
Anyone starting with the Forex trading should master the basics. For this I have to answer at least the following questions:
How big is my position?
What is the margin?
What is a LOT?
How much money can I gain from this trade?
What moves a forex course?
In Forex Trading, we trade for margin (security). This means that we only use a fraction of our own capital in each trade and receive the bulk of the brokerage from the broker.
If our account is capitalized at 100 EUR, we can not only trade this 100 EUR, but depending on the margin, up to 10,000 EUR.
If I want to trade 10,000 EUR in an FX pair, I choose the position size 0.1 LOT. I deposit my 100 EUR as a margin and get from the broker 9.900 EUR debt.
Is this scale useful? No way! Regarding your small account, 0.1 LOT is way too high. If the course would run a few pips against you, your 100 EUR would be gone and your account "flat".
If you trade with an account, which is smaller than 500 EUR, then you should m.E. Only with the smallest possible position. This is 0.01 LOT and corresponds to EUR 1,000 trading volume. Here I have a contribution about the calculation of your position size in the Forex Trading.
This allows you to make mistakes without losing your entire capital.
Why should you start with a higher fortune?
There is a statistic that states that 90% of all private traders lose money permanently and most beginners have destroyed the account after 3 months.
I guarantee you will degrade your first account very strongly! Even if you can hardly curb your current euphoria, be aware that successful trading does not come today. It usually takes years. Anyone who has completed 5 trades in a row in the profit is not yet a profit.
You need a functioning trading strategy and much more important: a strong character, because your psyche is put to a tough test.
So if you know your first year is highly likely to be lost because it is just part of the development process, would you go into trading with a total of EUR 100,000 with this sum? I hope not.
Whether you have 100 EUR, 10,000 EUR or 100,000 EUR is no matter, because in the first years, the trading is about building up expertise and you pay a lot of apprenticeship. Against this background, you should start with small amounts, regardless of your private assets.
