What is the Right Amount Required to Start Forex Trading?

What is the Forex Market？ 

The foreign exchange market, or forex market, is the most traded financial market in the world. The forex market is a global marketplace where financial institutions, banks, and investors can speculate on currencies. It is considered to be the largest and most liquid financial market in the world, with an average daily trading volume of $6.6 trillion. The forex is a decentralized market as all trading is done online, known as over-the-counter (OTC) trading. 

What is Forex Trading？ 

Foreign exchange is the process of exchanging one currency with another. This is a common financial process that can be performed for commercial or trading purposes. 

Forex trading is the speculation on currency prices for potential profits. Since forex trading is primarily exchanging one currency for another, currencies in the forex market are traded in pairs. The currency pair is a quotation for one currency against the other; known as quote currency and base currency. Currency pairs are affected by different fundamental and technical factors that affect the exchange rate. These factors include economic policies, political stability, trade flows, and of course the changes in supply and demand. 

Is There a Minimum Capital Required to Trade Forex？

The minimum amount of money you need to start with should be consistent with your goals. Other factors to consider are your trading style, your brokers minimum deposit requirements, level of experience, and risk exposure. In any case, you should never risk what you cannot afford to lose.

Disadvantages of Starting with a Small Capital

• Small investment capital means small lot sizes, fewer opportunities and limited profitability. A trader can get frustrated by small gains and probably give up trading.

• Trading costs can significantly affect your trading balance. Larger accounts usually enjoy lower spreads than the smaller ones.

• A small capital will get you stuck with day trading as you cannot afford to follow another trading strategy. You will have to monitor your trades carefully, and make sure to close them by the end of the day as the swap rates may blow up your account.

Can I Start Forex Trading with only $100？

It is possible to start forex trading by investment capital as low as $100. However, such a low amount will limit your trading options and profit potential. Let‘s assume you managed to achieve a 5% return on a trade, which is a great profit percentage. However, in this case, the profit will be only $5. But if you’re trading with a $2000 capital, the return on this single trade would be $100.

Trading on a budget can be helpful only if you are a beginner trader and want to step into trading without risking too much capital.

Read more on how to grow your small trading account