The foreign exchange market is one of the most easy-to-access financial markets. This simplifies getting started into day trading and you may even find brokers who require as little as $100 for a minimum initial deposit to open your trading account. Unlike futures or the stock market, you do not need heavy capital to get started with Forex Trading

How much you’re willing to trade with is your minimum capital and how you strategize and invest this starting capital, could, in fact, have the potential of bringing life-changing results. 

Once you have learned the know-how of forex trade, you are in a better position to make profits while safeguarding your funds from heavy losses. 

Research the Market

In the forex market, the more you learn, the more you grow. Since the trading volume in the forex market is one of the highest in the financial markets globally, having a good, well-researched strategy in place could give you an edge. Sound knowledge of the currencies you’re trading and the possible factors that could affect the market can help you achieve great results consistently. This will also put you in a better position to read the market trends and analyze their behavior. Once you’re able to understand and decode these trends, you will be able to accurately predict what course the market could take next. 

Forex traders generally use two main research methods to analyze the market for Forex Trading: fundamental analysis and technical analysis. 

Fundamental Analysis

Fundamental analysis as the name itself suggests, studies the fundamental factors such as economic decisions, GDP growth, etc that can have a possible impact on the currency. A nation’s currency position is often a reflection of how its economy is doing. So if you’re able to study all that surrounds and affects the currency vis-a-vis fundamental analysis, you will be able to predict both long-term and short-term market trends. 

Technical Analysis 

Technical analysis is done to see the demand and supply levels in the market. Key observations about the market’s future movements can be made through stock charts and technical indicators. Some technical indicators that you should gradually improve your knowledge about are: 

  1. Moving averages
  2. Moving Average Convergence Divergence Indicator also known as MACD
  3. Relative Strength Index (RSI)
  4. Momentum Oscillators
  5. Volume Figures

Open a Demo Account

If you want to first understand the functioning of the forex market, choose a broker who can help you with a demo account for Forex Trading. Usually, most forex brokers will offer a demo account that does not need you to make a deposit. Instead, you can simply use this to observe market conditions. 

This is a safe way to learn how the market operates on a trading platform without actually risking any capital. It is also a great way to research, create and test your own trading strategies without having to put your hard-earned money at risk. You can also use a demo account to begin working out your own trading strategy and putting it into a trading plan. Monitoring risks as a forex trader and handling profit as well as losing the right way could take you on the road to success in forex trading. 

Understand the Risks of Forex Trading

Day trading relies heavily on price movements. So if these movements do not happen to be favorable, instead of making big gains, you could end up incurring losses. To avoid this, most day traders would advise you to not risk more than 1% of your capital per trade. 

Trading Risks

The difference between the price you enter the market and the point at which your stop-loss order is activated is further multiplied by the position size and the pip value. This formula is used to assess the trade risk you’ve taken. When you borrow funds for your trade, typically from your broker, it is known as leveraged or marginal trading. With these forms of trade, you increase the risk of actually owing more than the amount you’ve invested. 

Risk Management

Financial markets can often be unpredictable. Therefore leveraged forex trading is an extremely risky way of funding your trades because you cannot be absolutely sure of your earnings. If you do not have that kind of risk-taking appetite, it is best to stay away from this type of trading. 

To minimize trade risk, stick to the 1% rule. For every $1,000, in your account, you should not risk more than $10, for every $10,000, you would not want to risk more than $100 in a single trade.

Create Stop-Loss Orders

As in every trade, it is essential to know your exact exit point. This is when you set a stop-loss order, especially when currencies are being traded. Stop losses or stops necessary to come out of a trade that’s losing money. These orders safeguard your trade against heavy loss when the base currency does not move in the direction you speculated it to. 

Stop-loss depends on the amount you’ve set aside for trade. There are two ways to put stop-loss orders in place; while one applies to discretionary traders, the other works better for system traders. To put this into practice, first, determine what kind of trader you are and then pick the methodology that suits your requirements. 

Online trading has opened the forex market to retail investors recently. Until now, this highly liquid market was the playground for big, commercial traders only. It has opened avenues for individuals as a great home business opportunity and a thrilling way of meeting one’s financial goals. Something which did not exist in the last 10 years. 

When done right, forex trading can help you earn a good source of extra income that you can earn from home, all with a $100 trading account to get started with. Invest some time into researching and creating your trading strategies. Even after this, if forex trading does not seem to be lucrative, you can always consider the $100 as a small amount, well spent on learning something new!

By Williumson

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