How to Trade Forex with $100 • Step by Step • Benzinga (2024)

Many people realize that $100 doesn’t buy much these days, but if you want to trade the foreign exchange market, $100 can get you started and could even generate a new source of income from home. If you develop and implement a successful trading plan, then your first $100 trading account could ultimately change your life for the better.

On the other hand, if you plan to just get into the currency market to make a few practice trades or gamble a bit, a loss of $100 generally won’t break the bank.

The key to success as a forex trader lies in a viable trading plan that you can easily stick to, whether you’re trading with $100 or $1,000,000 in your margin account. Continue reading to learn how to trade forex with $100.

4 Simple Steps for How to Trade Forex with $100

Trading forex with only $100 in your trading account can be a difficult task, but it is possible. If you follow these four simple steps, you can make your first forex trade with just $100 and increase your profits over time.

Step 1: Research the Market

Knowledge is power. These words take on a special meaning when applied to trading in the forex market which holds the top position for trading volume among the world’s financial markets. Knowing more about markets and trading, in general, increases your chances of succeeding when you forex trade.

Of course, if you just want to take a quick gamble with your $100, then you wouldn’t need to learn much more than how to enter orders in your brokerage account using an online trading platform.

To achieve any level of consistent long-term success, however, you will need to acquire a certain amount of knowledge about currencies and the fundamental factors that influence their relative valuation. Most online brokers provide ample educational resources for new traders that can include articles, ebooks, webinars and tutorial videos. All of these can help you learn more about the forex market before you begin risking money.

Step 2: Open a Demo Account

Most online forex brokers provide clients with a fully functional demo account, which reflects market conditions but does not require you to make a deposit. This is a great way to learn risk management and position size in the foreign exchange market.

The forex platforms provided by these brokers generally have comprehensive technical analysis tools such as charting and indicators that incorporate into the chart. If the broker supports the popular MetaTrader 4 platform developed by MetaQuotes, then you can automate your trading with expert advisor (EA) software you can buy or develop yourself.

The reason opening a demo account makes sense is so that you can get a feel for the market and learn how to use a broker’s trading platform without committing any funds. You can also use demo trading to begin working out your own trading strategy and putting it into a trading plan.

By learning how to take risk as a forex trader and seeing how disciplined you are when dealing with taking profits and losses, you can also determine if you have the necessary mindset to become successful as a forex trader.

Once you’ve opened your demo account and have begun trading with virtual money, you can start developing a trading plan. If you plan on success, remember that the more you know, the easier developing a trading strategy becomes. Take the time to review as many of the online educational resources on trading that you can, so that your trading plan has a solid foundation in best practices.

Step 3: Fund an Account and Start Trading

Once you’ve traded in your demo account and worked out a trading plan you feel confident with, you can fund a forex trading account and make your first real forex trade. Although trading in a live account may seem identical to trading in a demo account, you’ll have to deal with the emotional swings that come with winning and losing money, even if you’re only risking $100.

Fortunately, any viable trading plan can be traded with a $100 account since most brokers will let you trade in micro units or 0.01 lots. After you’ve refined your trading plan and have increased your working capital with profitable trading, you can then increase the size of your trading units. Avoid taking larger than expected losses by incorporating a sound money management component into your trading plan.

If you’re a beginning trader, you may want to restrict your trading activities to one particular currency pair before taking positions in multiple pairs in your account. Each currency pair differs in the way it trades because of the underlying fundamentals of the component currencies.

One of the best pairs to trade for a new trader is the euro against the U.S. dollar (EUR/USD) because of its high liquidity and tight dealing spreads. That helps explain why the pair is the most traded forex pair in the market. You can also have easy access to economic news that affects both markets, so EUR/USD typically makes a perfect vehicle to start trading forex with $100.

Step 4: Review Your Budget

Trading currencies with a $100 budget is a simple way to allocate funds and begin your journey. However, you must remain within your $100 budget until you feel it is wise to expand your investments. For example, if you allot $100 every month, stay with that budget. Someone on an extremely tight budget might allot $100 every quarter.

As you succeed, you may wish to reinvest your profits, cash out or save your money. If you plan to reinvest, you might raise your budget to $125 or $150. At no point should you increase your budget so much that you feel uncomfortable. The only way to succeed is to remain comfortable with the amount you are spending because you could easily lose the entire investment.

Benefits of Trading Forex in a $100 Account

The forex market has only recently opened to smaller retail traders after being virtually inaccessible to them before the advent of online trading. Just about anyone can now forex trade using their computers or mobile devices as an exciting stay at home business opportunity that did not exist a decade ago.

A modest $100 trading account could be the beginning of a new source of home-based income for you, just as it has been for a growing number of people. On the other hand, if you ultimately discover that trading forex is not for you, then $100 does not seem like much to lose to learn that lesson.

Forex Market Analysis Methods

You'll also need to learn how to analyze a market’s behavior to have a better chance of predicting its future direction.The two principal analytical market research methods for traders consist of fundamental and technical analysis.

Fundamental Analysis

This method analyzes the impact of economic releases and news on the market. Each currency’s relative value generally reflects the state of that particular nation’s economy and its geopolitical situation compared with the currency it is quoted relative to.

Below are the most important news events and indicators watched by fundamental forex analysts:

• Geopolitical shifts and other major news events
• Central bank monetary policy and benchmark interest rate levels
• Gross domestic product (GDP)
• Employment statistics (Non-farm payrolls, unemployment rate, weekly initial jobless claims, etc.)

Fundamental analysis gives you an important edge when you trade. Not only can it help predict longer term exchange rate trends, but it can also help explain and predict sharp short-term movements, such as those that coincide with significant economic releases.

Most online forex brokers include a news feed with their trading platform to help you perform fundamental analysis. Another important resource for fundamental trading is the economic calendar that lists all the important upcoming economic releases for various major economies.

Technical Analysis

You can study the forex market using technical analysis such as charts and computed technical indicators — a common method to determine the levels of supply and demand in the market that can influence and predict an exchange rate’s future movement.

By looking at exchange rate charts you can identify common patterns with predictive value. You could also use a variety of popular indicators based on market observables to help predict short- and long-term trends in the market.

These indicators can include moving averages, momentum oscillators, overbought or oversold indicators and volume figures. Some important indicators include the Moving Average Convergence Divergence indicator (MACD), the Relative Strength Index (RSI) and the 200-day moving average, to name just a few.

Trading volume is another important market observable to give an indication of how much activity accompanies a particular market move. Also, support and resistance levels suggest the degree of supply and demand existing at different exchange rate levels.

The charts themselves can also give important information to use and act upon. For example, a fascinating system of interpreting and trading candlestick charts was originally developed by Japanese rice merchants. These informative charts indicate the opening and closing exchange rates, the range of the currency pair and whether the exchange rate increased or decreased for each period displayed on the chart.

Overall, technical analysis provides a relatively objective way to analyze the forex market that can work well for predicting short-term market moves. Many scalpers and day traders use technical analysis to inform their trading activities.

Top Forex Brokers to Open a $100 Account

Now that you know how to trade forex with $100, it's time to choose a forex broker. Choosing the best forex brokers for a $100 account depends in large part on where you live and your requirements as a trader. If you live in the United States, then FOREX.com or IG can be good broker options.

If you don’t want to develop your own trading strategy but you still want to participate in the forex market, then eToro offers a copy trading service. This lets you pick a successful expert trader and automatically copy its trades in your own account. eToro also accepts U.S.-based clients in most states.

Check out and compare those brokers and more in the table below.

Frequently Asked Questions