The high-profit potential offered by the forex currency pairs has made the currency market a popular trading place for many. Millions of traders are trying to make money from the exchange rate Read More
In this blog, I will be sharing 6 tips to start small and succeed in forex trading so that you can be well-prepared before entering the dynamic currency market as a newbie.
- Learning and Planning
Learning and planning are two steps you should never skip as a new trader. Knowing the ins and outs of the forex market is essential to utilising your funds in the best possible manner, no matter how small or big your trading capital is. Firstly, do some research and study more about the currency market and how it operates. Later, you can start learning about fundamental concepts and technicalities of trading. You should also open a demo account to practise without any risk.
Once you have grasped all the key concepts of trading, you can start working on your trading plan. It is important that your trading plan is clear and well-defined. In order to devise a sound trading plan, you need to set realistic trading goals and pick a strategy that perfectly aligns with your trading objectives. Even if you are trading on a small account, you need to make sure that you have a rule-based strategy to follow,
2. Take Measures to Manage the Risk
The purpose of starting small with a lower amount of trading capital is to minimise the risk. However, you still need to take some measures to manage the risk and limit the potential losses. You mustn’t lose much money as your account will already be small, and the account drawdown should be controlled. So, you should assess your risk tolerance, set a risk/reward ratio, and limit the risk per trade just like you would do while trading on a bigger account.
You should also plan the trade entry and exit strategies for maximising the gains with minimal risk. Setting a stop loss and take profit for every trade is an exit strategy as it automatically closes the trade at prices that you specify, cutting the losses and locking the profits. You should also use tools like currency calculators to convert the values into the currency of your choice. This allows you to calculate all trade-related metrics more precisely by applying real-time exchange rates.
3. Select a Suitable Broker
Even if you are trading with a smaller amount of money, you cannot compromise when it comes to brokers and trading platforms. You need to select a suitable broker after considering the minimum deposit requirement and other trading conditions. If you want to trade on a micro or mini account with smaller lot sizes, you need to choose a broker providing these account types.
You need to make sure that the broker offers tight spreads and charges low commissions to minimise the trading cost. The cost of trading does impact your trading experience and profit potential. Since your account size will be small, you will have to be extra careful about how much you spend for placing and executing the trades. It would be better to choose a regulated broker even if your capital is low.
4. Develop Emotional Control and Trading Discipline
The small-sized trading account is a starting point for your trading career, and you need to remember one popular proverb in the initial phase – Well begun is half done. This means that you need to do your 100% even when you are not risking much in a trade. You need to avoid overtrading and develop emotional control.
Building trading discipline is important for a beginner as it helps you to stay focused and stick to your plan without breaking the rules. Such an approach can take you a long way as you work on gradually growing your account without taking excess risk.
In a nutshell, you don’t have to give up on your dreams or abandon your trading goals due to not having sufficient funds. You still have a chance to make profits by opening a small account and trading with a consistently profitable strategy. Success is not about taking a big leap but being consistent.