If you are ready to start trading Forex, you may have been practising on the demo accounts for long enough now and feel that you are ready to make that big leap into the real word of Forex trading. However before you jump right in with both feet you might want to look at your finances, in particular. How much should you start trading with and what account should you open?
It is fair to say that you can start FX trading with very little money. However depending upon your outlined objectives for example, how much money you are looking to make, this can be a bad thing or a good thing.Start on a Small Scale
It should be possible to open a trading account with any Forex broker for around £300 or less. However as a general rule of thumb, based on these figures you should be looking to lose no more than 1-2% of your money in any given trading position. It is always ideal if you can translate those percentages into cold hard cash figures, so 2% of £300 is £6.00. From this, you can easily see just what sort of account you should be able to trade safely in to keep within these parameters and ultimately, the amount of money you will make.
A Mini Account
You might think that a Mini account would be a good place for you to start. You would be able to place stop losses to a maximum of six pips and inevitably, if it all goes horribly wrong, the most you will stand to lose is your 2% or £6.00. However because it allows very little room for manoeuvrability, as and when the market shifts, there is a very good chance that you will be stopped out of your trade far too quickly. Therefore, chances of you making sufficient money in this arena is pretty slim.
A Micro Account
Alternatively if you have a Micro account and you still put the same stop loss, it will allow up to 60 pips in size. This means that it is possible to get away with a 30 pip stop loss and still come out on top. However more importantly, because you have that larger gap of flexibility in your stop losses you will stay away from the constant ‘zig zagging’ of the market. This way it is easier to spot a trend and make the most of it, rather than getting frozen out far too early.
Do not assume that if you only have a small amount of capital, that the smaller account is the right platform. On the contrary, try to look past the pounds and pence, to see the larger picture. If you would like to experiment with the latest software, open a demo account online at Alpari (UK) Ltd.