Forex Day Trading on a Shoestring Budget
A lot of people who look at trading on the forex market do not have a lot of money to invest. There are some people who say that you should have a certain amount of money to successfully trade on the market. However, it is possible to complete forex day trading on a shoestring budget. Of course, the returns you get will be lower than other traders. You should also consider the risks that you face with limited funds and whether day trading is really the best option for you.
Forex Day Trading with Limited Capital
There are three types of forex accounts that you can open. The one that most day traders use is the standard account, but this account does require a capital investment of at least $2000 in most cases. This is generally more than most people have to lose. The mini account is the second type of account that you can open. This is not generally used for forex day trading and is considered better for part-time traders and new traders.
If you are going to open a mini account you will need a few hundred dollars capital. This is enough for some shoestring budgets. However, it is the micro account that works best for a shoestring budget because you can open one with as little as $25. The problem with the micro account is that you do not make much in profits because of the small value of a single pip movement.
Trading with a Mini Account
The mini account is the one that shoestring budget traders should save to get. This account is the perfect middle ground between the more expensive standard account and the very cheap micro account. The reason why you should not look at the micro account is the fact that few brokers actually offer these.
The mini account also allows you to make enough profits to justify day trading. Most day traders do this for a living because of the strategies you will be using. Day trading is also the best option for traders on a limited budget. If you are going to complete long-term trades you need a large amount of capital to buffer the movements.
Shoestring Trading Strategies
If you are trading on a shoestring you should use strategies that do not require large amounts of capital. There are two strategies that these traders should consider and they are short-term trend trading and scalping. If you have very limited capital then scalping may be the best method to use. The scalping strategy requires a lot of short-term trades where you make small profits. Trend trading is also good because you have to have a defined trend that is bound to make you a profit.
All trading has risks, but there are some which are magnified when you trade on a shoestring. The main risk you face has to do with leverage. Traders who have small capital amounts often apply large amounts of leverage to make a decent profit. However, this leverage generally risks more than 2% of the account on the trade. Many people believe that this risk is limited by the small amount of time that you have a trade open when you use scalping strategies.