Have you ever wondered why some brokers let you start trading with 10 dollars deposit and others raise the initial deposit level up to $100? Believe it or not, but the limit is actually set in order to protect your money. To lose 10 dollars is much easier without drama, than $100 or $1000, that's why some brokers do not offer to their clients the access to cent accounts - they simply do not want to lose them. Also, this limit prevents speculators from playing with charts and allows them to accumulate a substantial amount of money for successful trading.
The size of a trader's deposit is very important since it allows to trade with fewer risks. Beginner traders often have no money for safe trading: a vast number of newcomer traders are students, those who live on social benefits, and unemployed. Their deposit is often too small, like $10, so they can't trade safely. They will have to risk more than 2% of their deposit amount, and that is considered unsafe. Look, the average intraday movement in the Forex market varies from 20 to 50 pips. When the trader enters with micro-lot, the risk is equal to somewhat between $2 and $5, which is 20% and 50% respectively from a $10 deposit.
If your trading experience seems more disenchanting rather than promising, ask yourself: is your deposit ready to protect you from unexpected market moves?
People say that a pessimist is a well-informed optimist. Remaining with empty pockets while trading is nothing new. Let's have a look at the worst first steps in trading:
All such inexperienced traders can think about is how to make a killing, but no one can trade wisely with that kind of trading psychology.
The main enemy of a trader at the start is greed. Ardent eyes, shaking hands and all that jazz. He wants to put up $10 right, but nothing works out. He bets 2, then 4, to get back those 2, after that the deposit vanishes, end credits, curtain fall. If you don't want to be disappointed in trading, remember:
The only money you should use for trading is your idle money. You can save up by holding back your urges for spending money on restaurants and weekends.
In the beginning, you are likely to earn some money in Forex trading, but also likely to lose. That is why you should not rely on trading as much as you can rely on your main source of income - your job.
Tune in to long-term saving as for your own business start-up. Mental discomfort will fade away if you combine trading with work: you will have enough money for a better living. Set a goal, "Save $1000 for deposit", stick it on somewhere like a fridge or a desktop.
Smart trader says: "I save up 15% of my salary monthly". "Too long…" - groans the rookie, "...and so difficult as well. Want it quick and easy".
But this approach doesn't work in Forex trading, where successful traders have been mastering one strategy for years.
Is it the mindset to blame? The right mindset trader always trades with micro lots, managing the risk, practices trading on demo accounts, attends courses and buys subscriptions. Never gives up studying. He saves up for some time and finally enters the market with a solid deposit of hundreds of dollars.
"Easier said than done", - you'll say. Where to get $5000 for Forex trading deposit to trade safely? Sounds like a lot of money, but not for a business start-up, where $5000 investment is a usual thing.
If the deposit you have is not too big and you have traded net positive for the last 2-3 months, there is a way to accelerate. You need a bug-free trading system tested on a demo and live accounts, risk surveillance, $200-$400 for a deposit. We'll teach you how to boost your deposit.
Boosting your deposit is a fast but risky way to multiply your initial capital through some methods. Further, one of them will be presented in details. It is called "Pyramiding".
Please note, this deposit increasing/boosting method has nothing to do with a deposit boost with a bonus. Before we continue, pay attention to some sensitive issues of this approach:
Notice: your trading system has to be profit-making for more than 2 months on both demo and live accounts. Starting your trading experience with deposit increasing methods is strongly not recommended. Knowing your system inside and out is very important to stay calm and reasonable during Forex trading.
The method is called "Pyramiding", because of its similarity with a pyramid, made of tiers narrowing upline. Imagine the pyramid is being built: a broad foundation, a more narrow tier, the more and so on till the top. Pyramiding method stands for adding up positions in the direction of the trend. In traders slang, pyramiding means trend refilling. This method has been used since the Wall Street era.
As it was mentioned above, the pyramid trading technique works by adding onto profitable positions. For clarity, if you start by buying 5 micro lots at one point of your chart and the market moves the way you expected, next you can buy 4 or 3, then 3 or 2 more. With every new buy, which should be smaller than the previous, move your stop-loss accordingly, taking the profit. That will help you not to expose yourself to big risks and secure the profits, adding up to your deposit step by step.
For example, EURUSD is in an uptrend and you have a trading strategy that gives you a buy signal. Look at Image below and read the paragraph, illustrating an example of pyramiding.
To master in building up tiers, test yourself on a demo account.
Do not forget to take profit of the previous position, moving the stop-loss to the new entry. Don't be greedy: there are no strong and long trends in currency pairs.
Also, set the limit to the increase you are going to achieve. If you start with $200, stop when you have $400-$500. Make up a Plan B to consider the possible failure. Have a "nest" ready to refill the deposit. If you recover from the drawdown quickly you are unlikely to experience the negative emotional effects from the failure.
Many Forex traders believe this pyramiding can also work in limiting losses. It's wrong. Do not add to losing trades. There is only one right way to handle a position that has gone against you. Two simple words: get out. Then you take a step back and start over. Pyramiding down has a snowball effect that can be devastating.
Along with the confidence, gained from the cases of successful trading, inflated expectations often come. Leave the job and trade all day is a trader's dream. Since the income is supposed to be received only from trading, the decision to leave the job may turn out to be a poor choice.
Your trading decisions will be controlled by the anxiety of losing money for living and such stress is not something that will motivate your trading. These three steps will help you to make everything right:
Open the MTrading Account and start trading today!
Stay tuned! Follow the updates in our Education section.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.