How to Start Forex Trading on a Budget
The forex industry has one of the lowest barriers to enter, out of all markets in the financial space. This includes free education, brokers with $10 minimum deposits, and leverage of up to 1:1000 with some offshore brokers. All of these provisions in place make the forex industry a great place to start investing if you’re coming into the markets on a tight budget. With that being said, is it possible to start trading forex on a small budget?
Well, yes, it is.
You can start trading forex with a very limited budget, even as low as a few hundred dollars. However, more starting capital does not correlate to more profit or faster learning.
In this article, we are going to look at how you can start forex trading if you’re on a tight budget, using all resources out there to learn the markets and start scaling your trading capital. Let’s get into it…
Forex Trading On A Budget
If you’ve stumbled across this article, I’m going to assume that you’re coming into the forex space with a fairly limited budget. In all honesty, 90% of traders will lose their funds within the first 90 days, so limiting your exposure isn’t the worst idea. In fact, there is very little need to start your forex trading journey with more than a few hundred dollars in most cases. Those traders coming in with $10,000 in trading capital are usually fairly quick to blow through the whole account value.
The less you start with, the less you can lose.
So, there are two aspects you need to consider when looking at trading on a budget. Firstly, the learning side of things. Typically, you need to pay for high-quality education – we will touch on this shortly. Secondly, how can you scale your small trading account whilst still using risk management? Again, we will dive into your options shortly…
How To Learn Forex Trading Whilst On A Budget
Learning to trade forex is usually a minefield in itself. With the education space in this industry being so unregulated, it’s impossible to tell if a mentor has actual value to provide, or if they’re just a failing forex trader looking to make a quick buck before they give up on the industry.
With that being said, I would strongly advise against spending a lot of money on courses. Here’s why:
- All the information you will be learning is already online, for free.
- You may quit trading after a few months, as most people do.
For these reasons, I would advise starting with the low-cost strategy of using free online content. Here are some great resources I would recommend for learning the basics:
Once you have the basics covered, I would then recommend moving on to finding a suitable trading mentor with a wealth of experience. This is the point at which I’d be open to the idea of spending money on education, certainly not in the first few months.
How To Actually Trade Forex With No Money
Assuming you have the education and knowledge side of forex trading covered, we still need trading capital to be able to ‘play’ in the markets. Luckily, there are a few options you can explore to get yourself into executing positions.
Option 1 – Demo Accounts
The most obvious way to trade forex on a budget is to use demo accounts. These are typically free and offered by almost all brokers in the industry. This account will mirror live market conditions in real time, but you’ll be using a fake balance. The point of these demo accounts is to sharpen your trading skills before ever approaching the live markets with real money and bringing your emotions into the mix. I’d highly recommend that every trader puts at least 3-6 months into a demo account and tracks their profitability before ever moving into a real money environment. You won’t be wasting any time by doing so, most traders don’t make a penny in the first 3-6 months.
Option 2 – Prop Firms
If you’re coming into the market with low trading capital or even a substantial balance, online prop firms are a great idea to rapidly scale your trading balance. In short, online prop firms like Lux Trading Firm will fund traders with real money accounts, in exchange for a share of the profits generated. For instance, we offer traders anywhere from $10,000 to $10,000,000 in real trading capital. Once our funded trader withdraws their profits, we take 25% in exchange for the funded account. A win-win, right?
This comes with no contracts, legal work, or headaches. You’d think it costs a lot of money to jump onboard with a prop firm, but surprisingly it doesn’t. This is by far one of the best options if you’re limited on money. Instead of putting your $500 into your trading account once you’re profitable, you could spend that with a prop firm and have a funded account of $100,000 – for instance.
If you’re interested in learning how to get funding as a forex trader, have a read!
Option 3 – Paper Trading
Paper trading is very similar to demo accounts, but without ever needing to set up an account. The idea of this method is that you predict in real time when the market is going to move. You place a ‘paper trade’, which is essentially writing down your entry price, stop loss, and take profit. You would then see where the market moves, and you’ll be either making paper money or losing paper money. This is a good way to learn to trade forex, especially if you’re low on trading capital. Personally, I’d much rather see traders using demo accounts with firm risk management during this stage. I would say it’s hard for traders to stay accountable and honest with themselves whilst paper trading, as bias and ego can come into play.
Option 4 – Find Investors
The last option you have at your disposal is to find investors to back your trading account. This is by far the riskiest option and hardest to pull off. Since the explosion of online prop firms, it’s much easier to find funded trading accounts than to find investors. For instance, you could become an Elite Trading Club trader in the next few months and have up to $10,000,000 in real trading capital. There is very little chance you’ll ever manage to find a high net worth that is willing to back your trading with just a few months of track record. Even if you were to, you’d have to sort out contracts and all the legal hassle – which is removed with prop firms like Lux Trading.
In Summary – How To Start Trading Forex With No Money
In conclusion, it’s more than possible to start forex trading on a budget and in fact, I would recommend it. I’ve seen time and time again traders coming into the market with a few thousand more than needed, and they will lose this money, 90% of the time! Coming in with limited money is a surefire way to limit the potential losses during the first few months of learning. Utilizing free education, followed by seeking funded trading accounts is a great strategy to maximize the reward without needing to remortgage your house for a good size account balance.
If you’re interested in working with Lux Trading Firm, contact us now!