Forex Trading Success Stories: Lessons From Traders Who Started Small

Trading with large amounts of capital can make forex trading seem like easy mode. The margins to be able to perform consistently and trade full-time are much smaller, requiring a lot less effort from traders to keep up.

However, sadly, most traders aren’t in a situation where they can dump thousands of dollars into their forex account and coast on 1-2% per month profits.

Trading forex when starting small is a whole different game. It requires a higher degree of dedication, patience, caution, and, at the end of the day, skill. However, the approach is also completely different, and general trading advice may not be tailored to people starting with sums in the low hundreds or even double digits.

In this article, we share some advice we’ve gathered from traders just like that. People who have been through the struggle of starting small but have managed to take the right steps and make it through.

Don’t Quit Your Day Job (Yet)

The first piece of advice for forex traders starting small is not to go all-in too quickly. Too many traders get excited by the first time they start seeing results, think they’ve got it in the bag, and decide to fully commit to forex trading. Of course, then reality sets in and they realise it’s not as easy to sustain a full-time forex routine as they’ve first imagined.

Nothing in forex is guaranteed. Everything can come crashing down quickly, and not having a backup can cause a lot of issues down the line. So, if you’re not a person with enough disposable funds to go big on forex, going all out too early can cause a dent in your personal finances and essentially have you starting over.

So, the tip here is a bit boring, but it’s to take it slow. Don’t jump on the train as soon as it starts moving, and wait until you are confident you have sufficient skills and preferably a backup.

Be Careful at forex trading

The next useful piece of advice is to be careful. With small sums, all it takes is one big blow to take you out of commission. Two things are particularly important to pay attention to.

The first is leverage. For traders starting out small, leverage is an incredibly potent tool that can negate a lot of their weaknesses in trading. However, as noted earlier, one big loss can mean lights out, and leverage can easily lead traders to that one big loss.

So, there’s a two-step solution here. The first is to get comfortable with leverage in a demo account. Small-scale traders can get swept up by the excitement of large positions, and if that’s going to happen to you, it’s better that it happens when it’s virtual funds at stake rather than your own.

The second step is taking things slow with leverage once you decide to apply it to a real environment, and doing so only on positions you are confident about.

The second particularly important thing is risk management. It’s much easier to learn how to win than how not to lose, but the second takes much more restraint and is how traders become consistent.

Risk Management for Small Accounts: How to Avoid Big Blowouts

We keep saying how it’s crucial to avoid big blowouts, and risk management is the key. This is true for all trading, but it’s much more pronounced on small accounts.

Now, some risk management advice may sound silly if you’re trading on a budget account. Something like “Don’t risk more than 1-2% of your capital on a single trade” may appear ridiculous when that 1-2% is only a few cents. But trading is a grinder’s game, and if that means making slow but steady progress, that may be a game you have to play.

The other part of risk management small-scale traders should pay attention to is setting take profits and stop losses. This circles back to leverage as well, since these two simple measures can help keep your excitement under control.

To prevent that big loss from happening, simply calculate how much you’re willing to lose on a position and set a stop loss there. It may be annoying if you’re placing a lot of small trades, but you’ll thank yourself once you see that a stop loss saved you from that long line that moved against you.

Grow Your Forex Account Slowly

It’s easier to trade with a larger capital, right? So, the goal of traders starting out small is to get to that larger capital.

However, that doesn’t necessarily need to come from trading exclusively. Trying to grow a $100 account to a $500 account only through trading is a tall task, and few traders manage to quintuple their initial position in a reasonable amount of time.

However, topping up an account with small amounts of money periodically can help traders get there much more quickly. This will have a cumulative effect. It will also allow traders to take larger positions without taking on too much risk and to reduce their margins to stay afloat.

So, traders who are in a position to devote at least a small portion of their monthly income to growing their trading account gradually may find that they are able to achieve more consistent results more easily than those who do so only through trading.

Don’t Let Your Emotions Get The Better of You

The final danger when it comes to trading on a small account is emotional trading. Greed and fear are the primary culprits for every trader, and you may have heard of these already.

Greed in forex makes you enter positions recklessly and stay in them longer than you should have, and fear makes you exit early or miss opportunities entirely. These can be circumvented with a good trading plan and risk management.

However, on smaller accounts, there’s also another culprit: overconfidence.

Overconfidence starts kicking in when your account starts growing. This is an especially delicate period, as traders can start feeling they’ve got it all figured out. Few traders actually do.

They may get complacent, forget their strategy, and just chase opportunities based on a hunch. Worse yet, they may forego risk management just because it’s more convenient and they are so confident that they’ll win.

That’s when that one big loss happens. This can wipe their account or put them back to square one, and not many traders are willing to start over.

If you start feeling like you’re the king of the world, consider dialing back. Recuperating from a big loss takes a lot of time, and even though you’ll get there quicker since you’ve already learned some lessons the first time around, you don’t want to get stuck in that limbo of making some progress, regressing, and starting all over. Many traders do, but if you successfully put your ego aside, you can avoid that.

Conclusion: It Takes Time

Whatever you do as a small-scale forex trader will take more time than if you were able to start with a large capital. While that may be frustrating, it’s also not all bad. If you’re disciplined during that time, you can build excellent trading fundamentals and learn to trade in tough situations. Once you get to a bigger account, you may just find that trading is a breeze.

Disclaimer: This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.