With mediocre capital can you still trade? Of course, you can, some of the following trading tips with small capital will be very helpful. What are they?
«Deposit is only $ 10, the price moves just 1 pip must have gone bankrupt
«Trading must have a large capital, if the capital is small, you will not get big profits.»
Maybe some of you are familiar with the perceptions above. It's not wrong, but that doesn't mean it's 100% right. Trading with small capital is often underestimated by some circles.
Success in forex trading is not determined by how much capital is used. Instead, it is knowledge, experience, and perseverance that will determine the success of a trader. A simple example like this; a trader with a capital of 100 million rupiahs, is very likely to lose all his money in a week if his technique is careless. On the other hand, a trader with a capital of fewer than 1 million rupiahs is also very likely to make a profit of up to 100% in a week if he applies a strategy that has been tested in a disciplined manner, and can take advantage of market conditions to the fullest.
So, how to successfully trade with mediocre capital if you are still a beginner? Maybe that's the question that comes to your mind right now. For that, the following tips are presented specifically to help you.
- Determine the Budget for Initial Trading Capital
Each trader's capital is different, so if there is a question about the right amount of capital for trading, it may be difficult to answer. So, if you want to trade with small capital, the first step that must be done is to determine how much «small» capital you mean. The purpose of clarifying these trading costs is to help find the strategy that best suits the amount of capital used. In this case, the more capital you budget, the more choices of trading strategies you can use.
- Practice on Demo Accounts Until the Advanced
Maybe trying to trade on a demo account for some traders is a waste of time. If you want to successfully trade with small capital, trying a demo account is a step that you should not miss. A demo account is a facility from a broker that is intended for novice traders. The benefits obtained if you master this stage are:
For novice traders (newbies), a forex demo account will provide a real picture of online forex trading.
Help how to use the forex trading platform
Helping to mature trading skills before using a real account, because at the same time practice doing analysis and execution of trades.
Can be used to test trading systems freely, without fear of experiencing real losses.
For traders who are still exploring or looking for a broker, they can register for a forex demo account to see how the technical performance (server, speed, etc.) of a broker is.
But it needs to be underlined, you still have to be serious even if you only use a demo account. Set up your demo account according to the account specifications that will be used in real terms, especially in terms of capital, leverage, and lots (trading volume) so that when you use a real account you will get used to it.
- Use Leverage And Lot Wisely
What is often overlooked by novice traders when trading is the use of leverage and lots. It would be nice if you use leverage and lots wisely. For leverage, traders will usually be caught in a dilemma; between choosing low leverage to be safe or using high leverage to get a bigger profit opportunity but risk getting hit by MC quickly. Some sources suggest that the ideal leverage is no more than 1:200. However, the choice of leverage is very flexible, as long as you can adjust it with good risk management.
In addition to leverage, what you need to consider next is the lot or trading volume. Traders with large capital certainly have better fund resilience. However, traders with small capital do not have that privilege, so they must limit lots from the start. Therefore, it is a good idea to set the position to micro lots (0.01).
- Choose a Broker with the Right Specifications
After mastering the third stage, it is time for you to start trading with a real account. Remember, the consequence of trading on a real account is that capital will be reduced and even risk getting a Margin Call (MC) to Stop Out if you experience a loss. Moreover, if you trade using small capital, of course, the resilience of your trading account is very low.
Now because of these factors, you are also very required to be careful in choosing a broker with specifications that match your capital size. Broadly speaking, the broker criteria that must be selected for trading with small capital include:
Allows a low minimum deposit.
Do not apply strict leverage.
Provides trading options with micro lots.
The existence of a cent account or nano lot is preferred.
Currently, many brokers provide trading services with the above criteria. So, when browsing broker specifications, make sure you have compared all available accounts, then choose the one you feel can support trading needs with small capital.
- Using the «Snowball» Concept
The next tip for trading with small capital is to use the «snowball» concept, which is not to withdraw the profits earned until a certain period. By delaying the withdrawal, your trading profit will go into the balance so that it can increase the margin every time you enter. The longer you collect profits, of course, the more capital can be traded will be more and more over time.
But what you need to know, this «snowball» method has a weakness, which makes you unable to enjoy profits in a short time. In addition to requiring a long duration, this method will also expose traders to the difficulty of maintaining consistency in achieving profits. The reason is, there is no guarantee that you will get a profit every time you enter because what you are facing is a market whose movements cannot be predicted 100 per cent. Well, what can be done in this case is to keep the win rate higher than the loss rate.
- Learn the Right Trading Psychology
It is undeniable, one of the main keys to a trader's success is the trading psychology factor. However, psychological factors are often ignored, especially by novice traders. And if left unchecked, this aspect will affect the way you trade. Signs of trading psychology that need improvement are as follows:
Greed. This emotion causes the desire for instant profit continuously.
Excitement. As good as it sounds, being overly excited can lead a trader to suppress common sense and make high-risk decisions when they see an opportunity to make a quick profit.
Afraid. Not a natural emotion to come up with when trading, but dangerous. If you are afraid to open a position for no apparent reason, afraid to lose, or even afraid to miss the momentum entry (FOMO), it's better to stop for a moment and rest.
Hoping too much. In forex trading, it is very natural to want big profits. However, expecting too much profit to ignore other analyzes will make you like a Gambler who is only risking fate.
- Use a Trading Journal with Periodic Evaluation
The last tip for successful trading with small capital is to use a trading journal which includes: Entry level, Exit, Stop Loss level, Profit Target, Lot, etc. One of the vital functions of a trading journal is as a tool for evaluating trading performance over a certain period. Without evaluation, it will be difficult to know the trading performance or trading system.
The evaluation period for each trader is certainly different. But the most important thing is to see the percentage of win and loss rates. A lower win rate indicates that the strategy system or trading psychology needs improvement. Conversely, if the loss rate is smaller, you still have to maintain and improve performance.
You need to know, consistently running the trading strategy that has been made is one of the keys to trading success. If you always change the strategy that has been chosen previously, it means that you do not focus on one trading system and do not use it consistently, so the trading results you get may not be consistent as well.
Recording a trading win or loss ratio is very important for a trader. If you are still confused about how to effectively compile a trading journal, you can learn how to create an easy and effective trading journal.
Tips: when you trading especially when you are a newbie better if you trade watch live trading on YouTube because so much you can learn over there.