If you have little capital to trade in the forex markets, you might think that the profits will be too small. That is true, but it is a distracting notion. If you are thinking about the numerical value of your profits (their amount in US dollar, for example, such as $100), then you might be slightly frustrated because you believe that this is not enough. If you are looking at your profit in terms of percentages (10% monthly return on investment for example), however, then you are doing it like the professionals.
Measuring performance in terms of percentages, rather than the amount of money, is your first step when trading on limited budget. Below are other important steps you would be wise to take.
Install a risk calculator on your trading platform
Sometimes, it is not enough to rely on your own judgement to manage risk. You need to install a risk calculator to know your risk tolerance limit with specificity, and not exceed it. A risk calculator helps you calculate two important things: your optimal trade size, and where you should place your stop loss. Both help you stay in control when it comes to trading.
Be patient and do not trade impulsively
It is understandable that you want to make profits fast. That is why you are trading, after all. However, this often becomes the very reason you make losses. Making impulsive decisions often leads to poor outcomes. You need to avoid entering and exiting the market on a whim. Take your time to analyze the instruments you want to trade, and make sure you find overlapping signals in the same direction before entering. This also means that you should find signals which point in the same direction from different time frames (the daily and the hourly, for example).
For other tips, you can read a beginner’s guide such as this from Easy Markets.
Stay up to date with the business and economic news
While you should not necessarily read the news every single day or every single hour, especially if you trade long term, you still need to be aware about the big forces moving the forex rates. This helps you avoid costly mistakes such as trading against the prevailing trend in the market. You can follow the most recent news by checking reliable economic calendars and reading the geopolitical news every once in a while. This helps you see the big picture and trade in context.
Maintain a long-term view
Trading with a small capital can be demanding in that the small profits won’t give you an incentive to trade diligently. However, you should look at the long-term horizon rather than the short term one. Over the long term, your capital will grow, and your winnings will be bigger. This can take months, or sometimes years, to accomplish, but it is worth it.
Focus on winning the war, not a single battle
Every forex trade you make is a battle, whereas your overall trading results are the outcome of the entire war, which consists of many battles (or trades). Losing a few trades won’t matter much if you are winning the war, and wars often involve having a few casualties here and there. It is ok to lose a trade every once in a while as long as you are managing risk well.
Final words
The above tips can help you, but there are plenty more. The bottom line is that putting adequate effort into your trading will yield good outcome with time, and that patience is the virtue of successful traders.