Why you should not Start with Low Budget in Forex Trading

If you are beginner in forex trading then chances are high that you will come across to such flashy banners of online forex brokers that claim traders can start trading with mini account with as little capital as $100. Offer is attractive indeed but investing such low amount of capital in online forex trading can not bring you success in forex online.

Mini Lots in Online Forex Trading

Most of online forex brokers offer the facility of mini forex accounts to their customers. Mini forex accounts can allow you to trade mini lots (10,000) units. Many new forex traders consider these mini lots as a great opportunity to start their career in online forex trading. However, there are so many forex brokers that do not offer this facility to their clients. It does not mean that brokers who don’t offer mini forex accounts are greedy or selfish. The fact is, when you trade with $100, your trade get heavily penalized.

Some Typical Example of 100$ Forex Trading Accounts

For beginners, trading with minimum deposit of $100 means that you are actually trading in forex exchange with 100:1 leverage. Let us analyze some hypothetical trading cases:

Case (100:1 Forex Leverage)

In reality no online forex broker will actually allow you to trade with such low capital but it will be interesting to analyze this hypothetical case. When you place your trading order with 10,000lot, your trading margin will be $10,000/100=$100. It means that if you will be down with 1PIP you will not only have to that trade but you will most probably lose the whole spread as well. You can not cover your trade as you will have no money to cover your margin and if you would like to make another trade then you will have to deposit more money in your trading account.

Only Invest that Capital which you Afford to Loose