One of the unique properties of forex trading is that it can be started with a very small investment. There are brokers who allow you to open an account and trade with as little as $50 or equivalent (or even less).
Maximum margins of 500:1 to 1000:1 mean that even with $50 in capital you can trade with positions up to $25,000 or $50,000. Of course if you use those margins, it means your whole trading account is in instant danger, as a measly 0.1-0.2% movement against your position can wipe your capital out.
But don’t worry there are ways to utilize your forex knowledge with a small investment (and turn it into a meaningful sum), you just have to follow some simple rules, as always.
What should you look for if you have $100, $500, or $1000 to invest with? Let’s see your choices as Canadian trader!
Mini accounts, mini lots
As the standard trading unit of currency trading is 1 lot ($100,000 position) with a standard account it is hard to trade with tight risk management if you don’t have at least $10,000 on your account. What is the solution?
There are brokers who have dedicated accounts and trading vehicles designed for beginners and smaller accounts called mini accounts and mini lots (allowing small positions). You should specifically look for a broker that has comprehensive support for small accounts offering a good range of products with mini lots.
You can find some good examples of mini accounts for Canadian traders at the bottom!
Strategies for a mini account
There are numerous strategies that you can trade with a mini account, the important part of them all should be risk management; you cannot allow a single position to get out of hand—it will lead to great losses compared to you capital.
Scalping is also an obvious choice for a small account. Being in the market for a short period minimizes the risk of a sudden event (like an economic release or breaking news) to surprise you and cause major losses.
Longer term strategies are also possible with mini accounts, you can let your winners run—catching a longer trend can help you in multiplying your capital quickly! Just remember to use automatic stop orders to protect your profits!
Two accounts as Canadian trader?
Because of the technical risk it might be wise to open two mini accounts (or separate one account into two if it is supported by the platform) instead of one, and split the risk. Why should you do that with a small amount? Well, it can make sense with larger accounts too, but with all the factors (event and technical risk) taken into account, it can easily save half of your capital when trading small, as one single unlucky trade won’t kick you put of the game.
Be extra careful with stop losses and news events
You have to use stop losses with a mini account, period! When the market turns volatile, your “mental” stop loss won’t be enough—forex pairs can jump violently. An automatic order can save you from a lot of headache.
A good tip is that take-profit orders on the other hand are sometimes contra-productive when trading with high leverage. Why? A violent move can happen in the right direction; you should be able to benefit from your luck! Think about it, this way you will have a chance of huge gains while limiting your losses at the same time.
Try the account and your strategies
With small amounts of money demo accounts are even more useful and important to use. You should be certain about the platform, position sizes, your strategy and the different types of orders you need to execute.
Using margin amplifies your mistakes but also your profits! You can have extraordinary profits with the right strategies and techniques.
Recommended brokers with good mini accounts
Here are some good choices for trading small:
As you can see although it is somewhat risky, forex is a great tool for investors with less capital, and you can eliminate most of the risks by following our guidance! So don’t be discouraged if you don’t have a lot of capital—you can still achieve your goals with trading!