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1/30/2020 Trade Successfully with a Small Forex Account - ForexBoat

Trading with a small Forex account is both a blessing and a curse. Blessing, because one can fail without
much harm in case things go wrong. Curse, because if you trade Forex successfully on a small Forex account,
you’ll have a hard time doing the same on a bigger one.

One of the best practices to trade Forex successfully is to use a demo account rst. All great with that, but one
thing misses: the emotions.

Demo pro t is just that: paper pro t. It doesn’t give you the thrills, emotions nor the excitement of actually
making the pro t.

A demo loss teaches traders nothing. When a position goes bad, traders tend to lose focus. After all, it is just a
paper loss. Nothing else.

All things equal, let’s imagine the opposite. A loss in a live account turns the trader upside down.

He/she will try to understand what to do next to trade Forex successfully. A solution may be to move to
manage a small Forex account. Next, grow it steadily and learn in the process. Finally, make the leap to a
more signi cant account and trade Forex successfully in a similar fashion.

In this article we’ll cover, among others:

paper trading – advantages and disadvantages


the emotional rollercoaster when trading
how to trade successfully for a living
the drawdowns of trading with a small Forex account
the bene ts of trading a small Forex account
costs involved to trade Forex successfully
money management in currency trading
successful practices to learn from trading a small Forex account

There’s no path known in advance. In the end, it is only a psychological game, a mindset to make it.

Pressure plays an important role. To make a pro t, to succeed, etc. Can you handle it?

HOW TO TRADE FOREX SUCCESSFULLY


This is a story about what it takes to trade Forex successfully. What are the sacri ces, the day-to-day things to
do, the ins and outs of the process?

Many things come to complete the picture. Time, for instance.

A retrospective look at markets doesn’t help. Namely, checking historical prices and saying, “I’ll buy here” or
“I’ll sell there,” won’t work.

It won’t work because it starts with a false premise. Do you have the time to trade? Are you available to trade
at those hours?
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Therefore, by time, think of:

availability to trade
the time zone you live in

Availability to trade refers to the “screen hours” to put in. Either trading a small Forex account or a big one, it
doesn’t matter. The ability to trade Forex successfully on a small Forex account builds Forex habits to use
later.

Most retail traders have a day job. After all, the bills come month in, month out.

Even if one manages to trade successfully with a small Forex account, it won’t be enough to cover for the
lifestyle. Hence, trading a small account for a living doesn’t make sense.

What makes sense is to learn successful Forex techniques on a demo account. Or, better, on a small Forex
account. And then try to replicate the performance with a bigger one.

Even having a larger account won’t justify giving up the job to trade for a living. But that is a di erent story we
won’t deal with in this article.

The starting point to trade successfully with a small Forex account is demo trading. The road to Forex success
begins with testing strategies. Hence, the demo environment works best for this purpose.

DEMO TRADING FOR THE BEGINNER TRADER

Demo or paper trading has plenty of advantage. For instance, it makes traders aware of the trading platforms
capabilities.

Moreover, it shows the full extent of the product range o ered by the broker. And, the trading conditions
when the market experiences volatile times.

Furthermore, it allows learning money management skills. And, how the trading account evolves by using
strict money management rules.

The cons of demo trading relate to the main reason why traders fail when trading a live account. The
psychological stress and emotional rollercoaster are so intense that they break stronger characters.

But those aren’t part of demo trading. Hence, traders can’t learn how to cope with those feelings, until they
trade a live account.

A Forex broker o ers various account types. Some with x spreads. Some other ones with variable spreads.

Trading a demo account gives the opportunity to see how the account performs in real life environment. For
instance, how di cult is it to execute a trade in illiquid times?

Or, how much the spreads widen in volatile times? Armed with the info, traders get ready for trading a live
account.

Obviously, it doesn’t make sense to fund it with a signi cant amount. Instead, funding a small Forex account
makes sense more.
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This way, traders:

test the funding methods o ered by the broker


see how long the opening of an account takes
see if there’s any di erence between demo and live conditions
check all the associated costs with opening a live trading account

Before trading a small Forex account, traders must understand the costs of it.

TRADING A SMALL FOREX ACCOUNT


One of the most critical advantages of trading a small Forex account comes from its size. Yep, small account,
small trading, less stress.

If there’s an ingredient to trade Forex successfully, this is the one. Unfortunately, it is easier to be relaxed
about your trading when having a small trading account, than when trading bigger lots.

When you know things won’t impact your life that much, it is easier to cope with drawdowns. And, failures.

However, when trading a large account, there’s a di erent story. Despite knowing the possible big rewards,
traders are scared of the risks involved.

The drawdown of trading small is that trading becomes a hobby. Not that this is something wrong. A hobby
denotes passion and doing what you always love to help.

But, trading as a hobby doesn’t get a trader far away. More precisely, treating trading as a hobby doesn’t help.

People go a long way for a hobby. And, many of them are expensive.

They don’t care about the costs. After all, what good is a hobby for?

For this reason, treating trading as a hobby won’t teach you trading skills to survive. You’ll always pile some
more cash in, as you’re in for something else. Not for making a pro t.

COSTS ASSOCIATED WITH TRADING

This part is valid not only when trading small. But, also when trading big.

Trading comes with speci c costs like:

swaps
costs based on the interest rate di erential in a currency pair
are both negative and positive
they di er for longs and shorts on the same pair
depend on the traded volume
charged after each trading day when positions rollover
swing traders and investors always consider potential swap costs or bene ts in a trade
spreads

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1/30/2020 Trade Successfully with a Small Forex Account - ForexBoat

x or variable
di er from currency pair to currency pair
variable spreads widen when vital news comes out
di er from trading account to trading account
commissions
apply to every trade
depend on the trade size
fees for the brokerage house
deducted the instant a trade becomes active
taxes
depend on the scal regimen of each country
apply to the gross pro t
usually paid for the previous year’s withdrawals
deposits/withdrawal costs
commissions and fees based on the funding method

So, let’s get this straight. From the potential pro t, you must deduct all the above.

What’s left is what you can use. Legally.

People rush into trading for the potential pro t. Day trading for a living sounds cool enough to do it.

However, a reality check tells us that the costs mount. Everyone wants a piece of the cake.

Regardless of the trading account size, these costs a ect results. Most of them are directly correlated with the
trading size, so there’s no economy of scale involved.

MONEY MANAGEMENT RULES TO USE

Using pending orders, it’s a start. Even when trading small, it copes with the realities in a trader’s life. Namely:
job, availability, limited resources, etc.

Pending orders give a disciplined approach to trading. The implications are that the trader knows what to do if
the market reaches a speci c level.

All trading platforms o er four types of orders:

buy stop
buy limit
sell stop
sell limit

Literally, they exist if the trader wants to:

buy from higher levels


buy from lower levels
sell from lower levels
sell from higher levels

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1/30/2020 Trade Successfully with a Small Forex Account - ForexBoat

Trailing stops increase the chances to trade Forex successfully. Traders use them to make the most of a trend.

For instance, many patterns have a measured move. That’s especially the case of reversal patterns, but not
only, like:

head and shoulders


double and triple tops
bullish and bearish ags
pennants
triangles

However, the measured move only comes to con rm a reversal. What if the market keeps pushing? What if
the trend keeps going after the price reached the measured move?

Therefore, traders trail the stop of a trade. Typically, trailing moves at the close or lower value (in a bullish
trend) of a speci c candle.

In the case of an opposite trend, things go the other way around. While not in the default settings with the
MT4 platform, traders can import indicators that solve the issue.

The rest of the money management rules you already know. If not, just browse through the articles in this
blog. I’m sure you’ll nd plenty of examples.

Things like:

risk only one or two percent of the trading account on any single trade
use proper risk-reward ratios
avoid overtrading
learn correlations, etc., should already ring a bell.

TRADING STYLES TO USE

Retail traders come to the Forex market for a quick buck. And, a fast one.

Therefore, scalping is the preferred way of trading. For those that don’t know what scalping is, here’s a hint:

buying or selling multiple times during the trading day for a quick pro t

Scalping, though, comes with elevated risks. Typically, traders that interpret economic news scalp their way
out of the market.

However, the technical analysis also works for scalpers. Even when trading a small Forex account.

To make the most of the market moves, traders focus on lower timeframes. This is what most of the retail
traders do.

While not exactly the recipe to trade Forex successfully, scalping on lower timeframes does make sense. After
all, even the Forex market spends most of the time in consolidation.

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1/30/2020 Trade Successfully with a Small Forex Account - ForexBoat

Moreover, some cross pairs do a range for long periods of time and scalping is there for traders to use.

Swing trading or investing don’t quite t when trading small. The reason for it comes from the human nature
trait of wanting things quick and accurate.

Namely, traders want a huge pro t (e.g., a million) but starting from a hundred bucks account. Well, that’s not
real, it’s just advertising. Or, daydreaming.

When reality kicks in, when trading a small Forex account such nonsense should be avoided. Know what you
can do with the account and master how to do it!

In need of Forex tips? Here’s one: scaling.

Scaling into a position means adding to a winning one. Or, averaging on a losing one.

While the latest option sounds like a martingale system, scaling does work. However, traders need discipline
and rules to follow.

If anything, this is the time to check what was mentioned in the money management section in this article.

NEWS TRADING WITH A SMALL FOREX ACCOUNT

Trading a small Forex account is also subject to new trading. This is when the market moves the most.

Or, when the opportunities arise. But, also the risks.

The biggest problem is that traders take the standard interpretation for granted. For instance, consider the
NFP (Non-Farm Payrolls).

The release shows the changes in the labor market for the most robust economy in the world. Released in the
United States, the NFP stands for all the jobs created in the United States over a month period, excluding the
ones in the agricultural sector.

Interpreting economic news is straightforward: good for the economy, positive for the currency.

Hence, traders of all types will buy the USD when the NFP beats expectations. And, will sell it when the release
disappoints.

However, trading is not that easy. If it were, everyone would be a millionaire at least.

The thing is that trading these days depends on what robots or algorithms do. What they buy, sell, trade
matters as much as the fundamental interpretation.

For a small Forex account or a large one, the initial market reaction will have a similar impact. Robots will act
as programmed.

However, revisions come out often. They refer to the previous releases, and algos get confused. Simply put,
they don’t know what do to next.

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Moreover, together with the NFP, the Unemployment Rate comes out. It so happens that sometimes the two
releases di er. Hence, even more, confusion.

Furthermore, other data related to other important currency in uences the overall ows in or out of a
currency pair. In this case, the Canadian jobs data comes out usually at the same time.

The point here is that new trading is risky both when trading a small Forex account and when trying to build a
strategy to trade Forex successfully.

CONCLUSION
Trade successfully with a small Forex account builds trust. And, as almost all retail traders know, this is a
necessary trait when speculating on the currency market.

To trade Forex successfully, traders need more than trust. They need time, the proper strategy, discipline,
money management, and guts.

Guts to ride a trend. Guts to have a contrarian opinion. And, above all, courage to stand against the general
consensus.

Literally, there is little or no di erence between trading a small Forex account or a big one. Trading small or
big should be just a nuance.

A trader will know from the start if he/she is in the game of trading for a living, speculating for fun or scalping
as a hobby. Life tells you why you are in the FX market.

For some, to trade Forex successfully is a piece of cake. Not for many, though.

If numbers don’t lie (and they don’t!), most retail traders fail on their rst approach to trading. This isn’t
encouraging.

Trading with a small Forex account is one of the reasons. Not because making a pro t is impossible. Instead,
the problem comes from expecting too much from a too small trading account.

To trade Forex successfully, a balance must exist. Between life, working hours, hours dedicated to trading,
passion, the size of the trading account, and so on.

Such a balance is hard to nd. More importantly, is hard to follow it day in, day out.

This is one of the reasons why traders end up programming robots: they can’t cope with the passion for
trading and the temptation of making an extra buck, with the discipline required.

Related Posts:

1. MetaTrader: Demo Account vs Real Account

2. What are the Best Times to Trade in Forex

3. Webinar Forex Video: What is Forex and How to Pro t from Currency

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1/30/2020 Trade Successfully with a Small Forex Account - ForexBoat

Related Posts:

1. MetaTrader: Demo Account vs Real Account

2. What are the Best Times to Trade in Forex

3. Webinar Forex Video: What is Forex and How to Pro t from Currency

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