Growing A Small Forex Account
If you are just starting out in the world of FX, you might not have a lot of money to spare, which makes growing a small Forex account that much more important. The fact of the matter is that growing a small Forex account is easier said than done. Yes, indeed there are a good deal of challenges that present themselves to anyone with a small account.
In all reality, there are plenty of aspiring traders out there who just don’t have enough capital to start investing thousands of dollars per trade. Folks, this is completely normal, and if your Forex trading account is small, there are ways of increasing the balance bit by bit, and with minimal risk too. Growing a small Forex account may not be easy, but it can be done. Today, we are here to provide you with some essential advice that will help get you off your feet.
What is a Small Forex Account?
Alright, so before we get into the advice about growing a small Forex account, it would probably be helpful to define what a small account is. Now, for the purposes of today’s article, we would say that any account with a balance under $1,000 is a small account. Realistically, when it comes to the volume at which professional traders trade at, anything under $10,000 could be considered a small account.
However, there are plenty of people out there who just don’t have that kind of capital to start with. Therefore, we are going to focus on growing a small Forex account, one that starts at around $1,000 or less. Yes people, starting with so little cash for trading is a challenge, but there are steps you can take to increase your chances of growing that small Forex account into something substantial.
Small Accounts vs Large Accounts
Now, you might be wondering why we are talking about growing a small Forex account, especially in terms of why it can be so difficult. Well, the reason why we are covering this specifically is because you have much more leeway when trading with a large account. For one, when you have a lot of money to trade FX with, you have a lot more options to work with.
Moreover, when you are trading with a large account balance, all of that cash serves as a buffer. For instance, if you lose $250 in a trade, but your overall account balance is $100,000, then that $250 is no big deal. However, if you lose $250, and you only had $500 to start with, then the overall impact is much more severe. Simply put, when you have little money for trading, every dollar counts, and even a single loss can spell doom.
Growing A Small Forex Account – Essential Advice
Right now, let’s go over some of the most crucial advice which you much follow if you hope to have any success when growing a small Forex account.
1% Risk Rule
One thing which you must always do as a trader looking to grow a small Forex account is to stick to the 1% risk rule. This means that on any single one trade, you should never be risking more than 1% of your total account balance. So, if you have $1,000 to begin with, you should not be risking more than $10 per trade.
Now, if your trading account is exceedingly small, and there is a fairly large minimum trade amount you must invest per trade, you might have to push it by a couple of percent. However, that said, you never want to risk a high percentage of your account balance for a single trade.
Ok, something that can come in handy when growing a small Forex account is to leverage your trades. If you leverage a trade, it means that you can trade with much more capital than you actually have at your disposal. In other words, you can leverage a trade, for example, by 10:1, which means that the trade you place might be for $100, but you only have to put up one tenth of that amount up front, so $10.
This can be very useful if you want to trade with more capital than you have liquid at your disposal. However, do also keep in mind that this can be dangerous too. If the trade turns out to be a loser, going back to our previous example, you will be on the hook for the full $100, not just for the $10.
Stop Loss & Take Profit
Something else you should always do when growing a small Forex account is to utilize stop loss and take profit levels according to your situation. Some people may set stop loss levels at well under half the initial investment. However, if you have such a small trading account, can you afford to lose even half the initial investment from a trade? Probably not.
Therefore, it’s a good idea to set your stop loss level b between 80% and 90%. In other words, if a trade goes south, at least you will only lose between 10% and 20% of the initial investment, but you’ll be able to save the rest.
In terms of take profit levels, some people get really greedy and hope to double their money. Well, as somebody with a small account, you need to take every single dollar of profit that you can get. Waiting and waiting for profits to keep increasing is not a good idea. If you have made a 10% profit, or even less, on a single trade, walk away with it. A small profit is always better than any kind of loss.
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Growing A Small Forex Account – Final Thoughts
The bottom line is that while growing a small Forex account does present some challenges, and requires a much more cautious approach to trading, it is more than doable. Now, if you really want to learn how to trade FX profitably, a course such as our own Income Mentor Box Day Trading Academy is highly recommended. With the proper training and skills in your arsenal, growing a small Forex account becomes much easier and more sustainable.