It is possible to start forex day trading with investment capital as low as $100. However, such a low amount will limit your trading options and profit potential. For a successful forex day trading experience, you will need adequate capital and precisely predict price movements. But first let’s get into more details about the day trading forex strategy.
What is Forex Day Trading?
Forex day trading is a popular trading strategy that involves buying and selling currency pairs within the same trading day. A short-term trading strategy where traders place a number of trades per day and close them by the end of the trading day, with no overnight positions. This strategy reduces exposure to market movements when the trader is inattentive to the market.
Forex day traders make profits out of price fluctuations. This explains why day trading is more focused on highly liquid and volatile currency pairs, and more popular among retail traders.
Minimum Capital to Start Forex Day Trading
Thanks to leverage, traders can efficiently start forex trading with just an average capital. Nevertheless, having an adequate capital is crucial for the trading strategy you decide to follow. Trading capital is a key factor for the success or failure of trading, needless to say among many other factors.
When it comes to decide how much capital is required to start day trading, you have to consider your risk profile and expected rate of returns. A forex trader can trade with $100,000 or $100. But which is the ideal amount?
It is important to note that there is no ideal capital for trading, as this is highly subjective and differs from one trader to another.
The minimum amount of money you need to start with should be consistent with your goals. Other factors to consider are your trading style, your broker’s minimum deposit requirements, level of experience, and risk exposure. In any case, you should never risk what you cannot afford to lose.
Scenarios for Forex Day Trading
Based on basic risk management, a trader shouldn’t risk more than 1% of total trading balance per trade. Let’s compare trading potential for different trading capital for better understanding.
Leveraged Forex Trading
Forex leverage is an investment tool of using borrowed capital to maximize an investment’s potential return. It is defined as the ratio of the amount of capital to the required margin. It also gives you the ability to increase your trading capital with a relatively small deposit, the margin.
By using a leverage of 1:100 for instance, every $1 you invest is worth $100, and with your $1000 margin, you can open $100,000 lots. For example, if the EUR/USD rate moves up 100 pips from 1.1100 to 1.1200 and you had invested $1000, you would have made $10 on that trade. But, with leverage, your $10 profit will be magnified to $1000 instead.
Because profits and losses are calculated on the total size of the position, so losses may be exceeding the initial deposit. That’s why leveraged forex trading is a double-edged sword. So, it is important that forex traders know how to manage leverage usage and adopt a strict risk management plan to mitigate potential losses.
Is Forex Good for Day Trading?
The forex market is ideal for day trading due to high liquidity and favorable volatility. The FX market is the most traded financial market in the world. It is considered to be the largest and most liquid financial market in the world, with an average daily trading volume of $6.6 trillion.
The liquidity refers to how active the market is. It is how easily or quickly you can execute a trade. Typically, it is determined by the total active traders and total trading volumes. High liquidity is one of the most common benefits of forex trading as it is accessible 24/5.
The market’s liquidity has a big impact on how volatile prices are. The more liquid a market is, the lower volatile the price is. That’s why most forex traded pairs like the EURUSD normally do not experience high price swings. On the other hand, exotic currency pairs fluctuate more often due to low liquidity.
Tips for Successful Forex Day trading
- Setting your risk tolerance level is critical. Your appetite for risk will impact your trading decisions greatly, and it is a leading factor in finding a proper trading strategy. Follow clear risk management rules.
- Develop a trading plan and stick to it no matter what happens.
- Short term trading strategies usually entail a great risk exposure due to the high number of trades. Consider testing your new strategies in a risk-free demo account before applying to your live trading.
- Since you’ll have to make multiple decisions in a considerably short time, your decisions should be based on technical or fundamental analysis.
- Do not overlook key factors such as volatility and liquidity when choosing your trading tool.
- Choose a reliable broker with an advanced trading platform to ensure instant execution of your trades.
How to Start Forex Day Trading?
- Open forex account to start trading now or practice risk-free with virtual funds on our demo account.
- Research the forex market and educate yourself with fundamental analysis basics.
- Enhance your knowledge of market technical analysis by studying price charts and technical indicators.
- Follow a strict risk management plan that involves using stop-loss orders in order to protect your capital.
Start Forex Day Trading with AximTrade
You can choose between various account types, based on your forex trading strategy, experience, and capital designed for investment. Enjoy favorable trading conditions with Aximtrade when it comes to margin and leverage levels.
Features of Trading Accounts from AximTrade:
- Variety of account types including Standard, Cent, ECN, Islamic and Infinite Leverage Account
- Excellent customer service reachable through email, live chat, and more
- Tight spreads and low minimum balances reduce financial commitment
- Fast order execution with execution speed at 0.004s
- Minimum deposit of $1 and no commission
- Instant deposit and, wide variety of payment methods
AximTrade is a fast-growing brokerage service provider in the global markets with a highly advanced MT4 execution and Copy Trade platform. One of the core values of AximTrade is to enable forex traders with easy-to-use technology, educational resources, technical analysis, varieties of forex bonus promotions, and a highly competitive trading environment with the best trading conditions.