If you are trading the forex market then you will undoubtedly know that it will be a risky venture. Most of the traders who trade currencies eventually lose their money. Unfortunately, some of them eventually lose a large portion of their net worth.
Many traders, especially beginners, are attracted to Forex because they see brokers offering leverage up to 1:200 and sometimes even higher levels. There is a common belief among new traders that they can use this leverage to make huge fortunes. This belief often leads only to tears in the end.
To be a successful forex trader, you must treat trading just like your business. It is not reasonable to put $50 and then turn it into $20,000 in a short period of time. It is true that there are some exceptions, but they are very few and far between.
This theory should be applied in the same way to forex trading. One of the reasons why traders lose their money is because they have a very small trading account.
One of the main advantages of forex is that you can borrow as much money as you want from your medium. However, it is important to remember that borrowing money to trade will increase your profits, but at the same time it may increase your losses.
There are no universal rules for determining how much money to borrow. Many new traders will have to start by borrowing very small funds although of course it will ultimately depend on the trading strategy you use.
If you have a $10,000 trading account, most brokers will allow you to open positions worth at least $500,000. If you buy the US dollar pair, the leverage may be 1:50, meaning that the position is 50 times larger than the size of your trading account.
It won't take many price movements in the wrong direction before you cause massive losses to your trading account.
Many new traders start with a small balance in their trading account. The same principle can be applied to the account with a value of $100 where it can open positions of $5,000.
The smallest trading position allowed by the brokers is $10,000, although they allow you to open an account with a value of $100.
Brokers don't mind it because they know that 99% of clients who do this will lose their account quickly.
The point I am trying to get to is that one has to be realistic. Treat trading as if it were your own business. Aim for realistic returns. Think about the stock market or mutual funds, these bring an average annual return of about 10%. So if you can make 30% per year through forex trading, of course that will be much higher!
Do not expect to make $1,000 per month from a $100 account. This almost certainly will not happen.