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How to Trade Forex on a Budget

Posted by : Premraj | Posted on : Tuesday, September 12, 2017


The forex market is one of the largest and most liquid in the world, with trillions of dollars’ worth of currency traded on a daily basis. This may make it seem like a rich person’s game, but in reality anyone can trade forex through one of the many online brokers around today.

Trading forex on a budget requires careful planning as well as knowing exactly how much you are willing to invest. Here are some tips for maximising your chances of success.

Use a Demo Account if Inexperienced

Most online brokers now offer demo accounts for those inexperienced with forex to practise and perfect their craft. This involves trading with a lump sum of ‘fake’ money with whichever currency parings you choose.

Since you can’t afford to be taking risks on a low budget, this is the best way to grow accustomed to the markets and build up a good deal of knowledge about how different currency pairings behave. It is also effective in showing you how to manage your trades and testing out different investment strategies to find one which will work for your budget.

Research the Market

The two main analysis techniques associated with trading forex (and trading assets other than currency) are fundamental and technical analysis. Fundamental analysis involves conducting extensive research on external factors which influence a currency pairing’s market behaviour, such as political elections.

Technical analysis involves studying graphs and charts of your chosen currency pairing’s past and present behaviour to see if you can work out any trends. There is much debate as to which method is more effective, but more professional forex traders use a healthy mix of both when trading. Mastering these techniques will stop you losing money unnecessarily through ‘gambling’ on your investments, and help you use your small budget effectively.

Invest Small Amounts

When trading on a budget, it goes without saying that you do not want to blow all your money on one or two trades. In fact, it is best to only risk between 1-2% of your overall budget at most if you want to minimise investment risk.

Forex is one of the most volatile and unpredictable markets, and no matter how sure you are of any given investment going your way, there will always be a chance that the market will turn against you. Minimising your individual investment risks will ultimately keep your budget tight and ensure you do not lose it in one go.

Develop a Strategy

Successful forex traders are successful because they always have an effective strategy which they stick to religiously. That is not to say a strategy should not be adaptable, but having a considered and logical one removes dangerous emotion from investments and ensures that each trade is well reasoned.

Again, it is worth researching some successful strategies online to gain a better understanding of how this works in practise.

Trading forex on a budget need not be a difficult task, you just need to be prepared to spend the necessary time preparing and honing your trading skills. Once you have developed an effective strategy, you can start slowly building your investment fund and maximising your chances of success.

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