Trading A Small Forex Account
One of the biggest challenges facing many new Forex traders is the size of their account.
It can be difficult to reconcile the level of your ambition when starting out with your own financial limitations. Many FX traders dream of taking large trades and making big wins.
But when starting out with an account size of EUR 1000 or less, this is impossible to do.
So, does that mean that trading a small account is a waste of time? Absolutely not!
Unfortunately for many, trading a small account is a right of passage. However, if handled correctly, it can set you up for long term success and improve your trading for when you have a bigger account.
Focus on Trading Your Strategy
The great thing about trading a smaller account is that it won’t pose the same psychological threats that a big account can have.
Starting with a smaller account means the figures will be less daunting and less likely to distract you from doing what you should be doing, which is focusing your Forex trading strategy and sticking to your plan.
Focus on % Results over Cash Figures
It can be discouraging for new FX traders starting out on a small account as they feel that the sums they are trading are meaningless.
However, the real focus should be on your percentage returns. If you can demonstrate consistent, positive returns with low drawdowns, then when you eventually build up to a larger account, you will have the means for attaining and maintaining financial success through trading.
Respect Your Account
Many new FX traders get frustrated with taking properly sized trades on a small account because the figures are so small.
If you are trading a EUR 1000 account and risking 1% per trade, then even a 3% winning trade will be just EUR 30.
However, it is important that you maintain your risk profile and build a history of consistent trading results which can help you attract investor capital or financial backing.
If you decided to risk EUR 100 on your EUR 1000 account through boredom, this amounts to a 10% risk, which is far too high.
So, regardless of the account size, it’s important to keep your risk capped at 1% per trade.
Focus on the Long Term
Unfortunately, many Forex traders view the markets as a means to quickly achieving riches instead of providing the tools to achieve long term success and independence.
The world of financial markets trading is becoming more and more democratized each year, and with the growth of social trading platforms and proprietary trading programs, many small FX traders are quickly gaining backing.
The key is to ignore the cash size of your account and focus on generating consistent positive returns, with good risk: reward. If you can put together a year of consistent returns, you will quickly be in a position to grow your account size.
Focusing on these elements will mean that your experience of trading a small account will help prepare you for trading a larger account and give you a foundation for long term success.