Here’s how to start building a small forex account using day trading, including what type of account to open, what time frame to focus on, strategies, and expectations. Forex trading allows you to control your position size precisely, and make 100 dollars a day forex trading leverage, both which aid a small trading account. We will discuss both these concepts a bit later on. To keep the article to a reasonable length, links are provided to articles or resources with more information on a given topic.
Please read those as well to get a full grasp of the concepts. 1000 or less, trade through an ECN broker that offers a near-zero spread and low commissions. Using an ECN broker means you can capitalize on short-term opportunities and still manage risk. That translates to lower spreads, and you can instantly buy and sell whenever you like. Non-ECN brokers typically charge larger spreads and are acting like a middle-man between you and the market. Orders may be slow to fill, and there may be limitations on where you’re allowed to place orders.
Limit, stop, and market orders are our three main order types as day traders. As a day trader, one of the most crucial factors is the spread you pay. It has to be low if you expect to succeed. During active times, such the US and London session, the spread is typically around 0.
Another crucial element is order speed. When you hit buy or sell you want to know that you will get into or out of that position instantly. If there is a time lag, that is a big concern because lags can cost us a lot of money in fast-moving markets. Micro lots give you the ability to really fine-tune your position size and risk on a small account. Currencies are traded in different unit sizes, and micro lots are the smallest one. 1,000 account, make sure the broker offer micro lots.
Also, when setting up an account, request 30:1 leverage. You won’t need that much, but if you don’t need it you don’t have to use it. Leverage will be discussed more later on. With a near zero spread, I can actively trade price moves that are about 8 to 25 pips from start to finish. Volatility is always changing, which means how many pips are risked and captured also changes. Here’s a chart of the London session from April 27, 2018.