To start forex trading with $100, first, you need to understand how the market works. These could take up to 6 months, or more to figure out. During that period you would have to backtest a different trading strategy and you would probably find a high probability trading strategy.
Next is to open a real account with a regulated and licensed broker that offers a nano lot. But you know, your high probability trading strategy Is not enough to guide your $100 capital, and two of the best ways to do that is to understand how to manage your emotions and money.
Forex trading Is different from any other business. If you have no idea about how the market works, you will struggle to make a profit consistently. The market is composed of two players, the market makers, and the retail traders.
These happen in all financial markets, and some experts will tell you not to see the market as sellers and buyers, instead market makers vs retail traders.
Because the market makers are more powerful than you, and they are in the market to trap and make money from you.
Let me quickly blow your mind!
If we are a big community of traders who take the same trade, we will be able to move the market in our direction, because this is how the forex markets move.
If the amount of buyers is more than sellers, the market goes up, and if the number of sellers is more than buyers the market goes down.
Also read: 10 Things You Need To Know Before Going Into Forex Trading
Develop A High-Probability Trading Strategy
You don’t just start forex trading with $100, hoping to turn it into much bigger equity. However, to achieve this, you need a high-probability trading strategy.
Forex trading is lucrative, and right from the comfort of your home, you could make thousands of dollars every month using a high-probability trading strategy.
Whether you are a beginner or an advanced trader, some technical skills will help you develop a great trading strategy.
The first technical skill that you should acquire as a trader is the ability to understand the candlestick pattern formations, because they give information about the buyer’s and seller’s state of mind, and help you predict future price movements.
The second technical skill is the market structure you will hear traders saying structures don’t lie. You need to know how to identify and differentiate between different types of markets such as trending markets, ranging markets, and choppy markets.
And you should be able to identify support and resistance or supply and demand or floor and ceiling, which are considered to be the turning point in the markets.
Those are basic technical skills that will help you develop a high-probability trading strategy.
Open A Real Account With A Regulated And Licensed Broker That Offers Nano Lots.
With a $100 account, you need a regulated and licensed broker that offers nano lots.
In forex trading, a standard lot is a hundred thousand units ( 100,000 ) units, a mini lot is ten thousand units ( 10,000 ) units, a micro lot is one thousand units ( 1,000 ) units, and a nano lot is below one thousand units ( 1,000 ) units.
As a beginner, if you want to enjoy trading forex without blowing your account, then you need to be using nano lots especially if you have capital like $100.
With a $100 account using nano lots, you won’t make many profits, but with this idea, it will be difficult to blow your account because if you trade nano lots with a 2% stop loss, and the trade goes against you, you will only lose $2 out of your $100 equity.
When starting, it’s not all about stacking the profits, it’s more about being successful, and with nano lots, you have an edge.
Money Management
Most beginners think that having a powerful trading strategy is all that they need to become profitable, they spend years looking for that holy grail that will make their dreams come true.
So, if you are one of them, I want to tell you that the win rate of a trading strategy has nothing to do with your success as a trader.
You can lose money with a win rate of 90% or even 99% if you have a poor money management strategy.
On the other hand, you can become consistently profitable with a win rate of 30%, if you have a good money management strategy.
However, there are concepts of good money management skills which are risk-to-reward ratio and position sizing.
It is paramount to your consistent profitability in the forex market that you understand the importance of the risk-to-reward ratio and how it relates to position sizing.
Before entering any trade, you need to know the exact dollar amount that you want to risk, and the exact reward you think you can make on the trade. Once you have determined the dollar amount, then you adjust your position size to meet this amount.
If you are trading micro lots and want to risk 50 dollars on a trade with a 100 pip stop loss, then your position will be 5 (remember 5 micro lots would be half of 1 mini lot).
5X100= 50 dollars. So, you would have a position size of 5 mini lots (5 micro lots) risking 50 dollars with a per pip value of 50 Cent.
Position sizing allows you to adjust the number of lots you trade to meet the amount of money you want to risk per trade, this allows you to use wider stops but still maintain your desired dollar risk.
Many forex traders mistakenly believe that a wider stop loss will mean a bigger risk. If your desired risk amount is 100dollars but you want to place your stop loss at a level that is 200 pips from your entry.
Then you simply adjust your position size down to meet the dollar amount. Similarly, many traders think that a smaller stop-loss means a smaller dollar risk.
This is not always the case, however; position sizing will explain this. If Toheeb has a stop loss of 50 pips but is trading 5 dollars per pip (5 mini lots) then his risk is 250 dollars on the trade.
Okakitan has a stop loss of 100 pips but is trading 2 dollars per pip (2 mini lots) then her risk is 200 dollars on the trade. As we can see smaller stop loss doesn’t necessarily mean smaller risk, position sizing determines your dollar risk on the trade, not pips.
Manage Your Emotions
This is another crucial skill every trader needs to possess because they are essential to your trading success.
Emotions are strong feelings you have as a human, and they are usually ways you can express yourself. But in forex trading, emotions may be doing more harm than good.
However, it’s impossible to control your emotions, and you can’t avoid them but the best you can do is to learn how you can manage them.
And the only way you can manage your emotions is to have a trading plan that clearly defines the reason why you should execute a trade, your entry and exit, and the amount you are willing to lose or make.
With that, you shouldn’t worry about the results before executing a trade.
So, as a beginner or advanced trader, if you want to start forex trading with $100, put your emotions under a checklist, and focus on executing your trade plan without fear.
Also check out: Best Forex Trading News Apps To Guide You
Conclusion
We’ve just completed the 5 profitable ways to start forex trading with $100.
You do not necessarily need a bigger capital for you to be a successful trader.
All you need is to understand how the market works;
- Develop a high probability trading strategy
- Get a regulated, and licensed broker that offers nano lots
- Understand and apply money management
- Manage your emotions.
