Trading capital is one of the most important problems of novice Forex traders. Many of them learn or even master the Forex trading techniques. But they don’t have the money they think they must have to start trading Forex and making a reasonable amount of monthly profit. That’s why they want to know whether Forex trading with a small capital is possible, or they must have lots of money to do it. Therefore, if that’s also your question, make sure to read this article to the end because you will not only receive the answer, but also you will learn lots of things that you must know before you start trading with real money, whether with a small capital or a professionally large account size and a big trading budget.
Is Forex Trading With a Small Capital Possible?
Yes, it is possible because some brokers allow you to open a live account even with a $100 capital. However, there are a lot of things that you must consider before you do this. There are also some other factors that you have to take into consideration if you want to succeed as a Forex trader who trades with a small capital. You will see that it is possible to grow a small capital into millions if you follow the below directions.
Is Trading Forex With a Small Capital the Right Thing to Do?
It depends on some conditions and factors:
Become a Consistently Profitable Forex Trader First
The first factor is the level of your knowledge and skill as a Forex trader. If you haven’t mastered your trading strategy yet, then you won’t succeed with any size of capital. You will lose your capital, whether it is small or large.
Many Forex traders wipe out their accounts several times before they give up on Forex trading. Most of them are Forex traders who trade with a small capital. They start trading with real money when it is not the time to do it yet. They just learn a Forex trading system, demo-trade it for a short while like a few weeks/months, make some winning trades, and so they think that they are ready to open a live account and trade with real money.
I have even seen some traders who don’t demo-trade and start with risking their hard-earned money from the beginning, which is so insane. Such an overconfidence ends in nothing but big losses, no matter how professional and skilled a doctor, engineer, teacher, university professor, researcher, or taxi driver you are. Forex trading has a different story. It is a different animal. Your previous profession and education cannot help you succeed in Forex trading, either with a small capital, or a huge trading budget. You must turn into a different person if you want to make money through trading, be it Forex, stocks, metals, cryptocurrencies, etc. Overconfidence has no place in this game.
Whether you want to trade Forex with a small capital or a large one, you must start doing it only when you have mastered your trading system and you have become a consistently profitable Forex trader who is able to make an n% profit every month, consistently. You should be able to repeat this over and over, at least for 6-12 consecutive months. If you start trading with real money, while you haven’t reached the level I described, then you will wipe out your small capital because you will have more emotions and stress when you trade Forex with a small capital that you try to grow as fast as possible.
You Must Start With a Small Capital First
When you master your Forex trading system and have become able to repeat your success every month consistently, then you must start with a small capital.
The reason is that even when you become a consistently profitable Forex demo-trader, you will have some emotions when you start trading with real money. This can cause you to start losing money, whereas you used to make profit with your demo account. When you know that you are risking real money for the first time, it can cause you to have some harmful emotions, FEAR and GREED, that don’t allow you to decide properly. You will either think that now that you can grow an account, it is time to make a fortune and make lots of real money. At the same time, you are afraid of losing your real money.
Therefore, you must start with a small capital which is also the money you can afford to lose. While trading Forex with such an account, you must treat it exactly like the demo account that you have been doing good with. In general, you must treat the demo and live accounts exactly the same, if you want to build your Forex trading discipline.
You should never think that your demo account is not important, and it is okay if you lose money with it just because it is a demo money. When you start trading with real money, you should not be more hesitant, considerate and obsessive than what you have been when trading with demo money. Under any conditions, you should only see the strong and true trade setups, while you take only a 2% risk in each position (read this).
A disciplined and consistently profitable Forex trader is someone who trades properly, either with a demo or live account, or with a large or small capital. They take only a 2% risk with each position, while they only see the true and strong trade setups. Their risk to reward ratio and success rate is also good and satisfactory all the time. It is like driving. When you are a good driver, you can drive properly with any car. When you are a bad driver, you will make a mess, no matter how good your car is.
You Must Choose a Good Broker If You Want to Trade Forex With a Small Capital
Many Forex brokers support micro lots and too small accounts like $100 or even less. Most or all of these brokers are market makers, and so their clients’ losses are their profit. They want their clients to lose money and wipe out their accounts, and they do know that most of them will do this eventually. It is not bad to be a market maker broker because there are some good ones too. But most of them, especially when they are overseas, they make you lose if they can. So, it is risky to open a live account with these kinds of brokers and start trading Forex with a small capital.
I don’t recommend you to trade Forex with brokers that support small capital accounts like $100, especially when they also offer bonuses and for example they reward you with a 25% bonus when you open an account with them and deposit some money in it. Offering these kinds of rewards is a red flag. A broker who adds $25 to your $100 capital knows that you will lose this money, otherwise they wouldn’t do this. A $100 account cannot even make a $5 profit for the broker, through charging spread and commission. So, when they reward you with a 25% bonus, they are after making you wipe out the whole account.
If you really want to start your live Forex account with a small capital, then you must do it with popular, regulated and legitimate brokers that have a good reputation. Don’t open a small account with a broker, just because they reward you and add to your capital. This is just a decoy to make you open an account with them and deposit some money in it. Professional and legitimate brokers never do this because it doesn’t make sense to. Starting with a $1,000 or $5,000 account with a good and legitimate broker is better and safer than starting a $100 account with a scam broker who rewards you.
How to Trade Forex With a Small Capital
It is possible to trade Forex with a small capital, if you follow the above rules. If you are the consistently profitable demo-trader that I described above (not a demo-trader who’s succeeded to grow their account for a few months, while their track records don’t reflect consistency and discipline in risking 2% of their capital, having a proper R/R ratio, etc.), you are ready to start trading Forex with a small capital.
I emphasize that you MUST start with a small capital, even if you can afford to have a big account. The reason is that the first Forex live account that you open after becoming a consistently profitable demo trader is part of your learning curve. You must confirm that you can trade with real money, exactly as you traded with demo money. You should become able to repeat the same success with real money too.
To make sure that you can do it, you must open a live account and deposit a small capital, like $500 or $1,000.
No need to say that you must choose a good broker, the way I explained above. Therefore, here I am assuming that not only do you meet all the above conditions to open a small live account, but also you have chosen a good, reliable and legitimate broker.
Then, the same monthly profit and consistency that you had with your demo account for 6-12 months has to be repeated with your small live account as well, for another 6-12 months. If you can achieve this without any problems, you can increase your account size by depositing more money if you can afford it. If that $500 or $1,000 is the only money you can afford to deposit in your account, then keep on growing it that way. You can grow it to hundreds of thousands of dollars, or even millions of dollars gradually, if you maintain your consistency. Read this article to learn more about doing this.
Use 10-20% of Your Capital to Open a Forex Live Account
As I mentioned above, you must trade with the money you can afford to lose. It means, you must trade with the money that you don’t currently need, and you won’t be dependent on it in future too. Therefore, you have to use your savings to open a live account. However, you should not use more than 10-20% of your savings to do this. For example, if you have a $100,000 saving, then you should use $10,000 or maximum $20,000 of this money to open a live Forex trading account. You should never use the whole amount. Yes, this is still trading Forex with a small capital, but it is what you should do. There are several reasons behind it.
If you open a Forex live account with all the savings you have, then you may get emotional while trading with it. Keep in mind that you haven’t become a fully-professional Forex trader yet. You are just trading with the first real and serious live account. So, you must be careful. I have already seen so many traders who have lost all their savings while they thought they had become great traders.
If you start with a small capital like $20,000 and you make only 10% profit every month, then your account balance will reach $618,254 after three years of trading, if you don’t withdraw any money (use our spreadsheet to do the calculations). After three years, you can withdraw $68,000 per month, if you make the same 10% monthly profit. A $68,000 monthly profit/income is great, isn’t it?
Therefore, it is possible to trade Forex with a small capital. Not only it is possible to do it, but also you can turn your small capital into millions if you don’t lose your consistency and discipline and you follow the steps and tips I have explained in this article.
