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Low deposit on Forex trading. Obstacle or challenge?
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Low deposit on Forex trading. Obstacle or challenge?

created Adam Kondracki8 May 2019

Many novice traders are struggling with the lack of cash that they could spend on trading. Let's be honest, not everyone, and in fact most of us can not afford to start trading with amounts of several dozen or several hundred thousand. I advise against taking loans from your family, friends or the bank right after reading some books. Do not believe in quick profits, learn from the mistakes of others. At the beginning, most lose. Do not let this discourage you.

In this article, we will look at this issue and see if 3 or 4-digital totals provide an opportunity for successful learning of trading, applying the principles of capital management in practice, and regularly developing a satisfactory profit.

Little, or how much?

There are different types of small trading accounts. There are standard, mini, micro accounts and also quoted in cents instead of dollars. On the one hand, accounts in cents give better capital management options and the fact that the 10000 account has currency units (cents) instead of 100 (dollars) gives a pleasant feeling of turning high denominations. As I have already mentioned, cent accounts allow for a more precise selection of the position height with this amount of capital, which is important in risk management.

Does a low deposit induce gambling?

A low deposit on the investment account unfortunately very often leads to frustration due to low profits in relation to the costs incurred, which are the time of learning and the duration of the investment itself (waiting for the outcome of the transaction). When, despite the long waiting time, we see how an open position revolves around zero or brings a few zlotys profits, we are looking for a way to open larger positions or simply "go to the whole" by opening the maximum position on a given market.

In the common sense approach, the expectation of achieving regular, I stress, regular profits at 20% per month borders with a miracle. I warn you here before suggesting the results of competitions on the brokers' websites, where the results sometimes amount to as much as several thousand percent of the return during the month. Puzzling only why the same player never appears in the list twice. This is gambling behavior that should be eliminated from our game.

If, for example, we are going along a more risky path and invest 5% of capital (book safe risk, then 2% and less) per single transaction, on a monthly basis, depending on the current market situation, we can count on several, up to a dozen or so percent of earnings . It is easy to calculate what would be a capital gain of 1000 PLN.

Example

We have 1000 capital in PLN and in the month we conclude 30 transactions with RR 1: 1,5.
Half of it ends with a loss, half with profit.

5%, or 50 PLN for each transaction gives us:
15 x 50 PLN = PLN 750 loss
15 x 75 PLN = PLN 1125 profit

Balance of the month = 1125 - 750 = 375 PLN of net profit.

The only question is whether we have such a strategy and whether it will be possible to open 30 transactions monthly with regard to low lever, currently in force in the European Union. Due to the low leverage to open another position, you often have to wait for closing the previous one, which requires a large security deposit. It is also necessary to take care not to open the position for greater safety correlated markets. Because correlations can be broken, it is safer not to have two open positions with one common currency. Considering the above, the situation starts to get complicated because to reach such an indicator of the number of positions in the month we have to go down from daily interval on H4 or H1, which inherently give more frequent but therefore more misleading signals. As we can see, the situation is getting more and more complicated all the time.

The hypothetical example above is hypothetical, because it is statistically impossible to achieve such profits regularly, but the individual cases are very realistic.

Wnioski

As we can see, turning small capital is usually and frustrating. Entering the market with 1000 PLN may give us a satisfactory sum, but this is only possible with an unreasonably high risk: no stop lossa, high leverage, large position. For scientific purposes and for the purpose of familiarizing with the market, the rules of concluding transactions and the sense of "those emotions", any amount is acceptable, even the smallest one. However, if forex trading is to be a way not so much for life, but for making a basic income, it is worth collecting a higher amount and having a good strategy developed, try to aim at profits of several-dozen percent a month. Then the level of stress accompanying each transaction will surely decrease and the profit paid out each month will be something tangible and instead of the millions of dreams we will have an additional cash injection worked out honestly and fully due to us.

I strongly encourage you to take this approach.

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About the Author
Adam Kondracki
Passionate about investment topics, especially currency markets. The first contact with the stock exchange was in the 2011 year. Every day a graphic designer and an office worker. Amateur cycling. Listens to electronic music, is interested in psychology and loves to conduct interesting discussions until late at night. Electronics technician and master of philosophy by education.