Trading with a 4k Account: Forex Trading, Spread Betting or CFDs?
I'm often asked recurrent questions of whether it is practical to "trade with a 4k account" and the "how to trade sub 100k accounts" and I'm surprised so few mention forex as a viable alternative.
I understand that forex has the inherent disadvantage that you can only trade currencies as opposed to spread betting or CFDs, so you don't have the chance to really diversify; but then again, you wouldn't be able to diversify in anything with a small account.
On the other hand, there's at least one forex broker I know of, that offers the option of trading quantities as small as 1USD. This is 1/100,000th of a Lot, variable in 1/100,000 lot increments. That would allow a trader with practically any account balance, to follow any risk management rules they want to. Isn't this point, risk management, the critical point of trading such a small account?
Maybe nobody recommends forex because of the generalized lack of confidence in the brokers or the market itself?
In fact the main problem is that many Forex FCM's are modern bucket shop equivalents. They provide you with quotes and a free trading platform (like MetaTrader) and they have the ability to delay your order and widen the spread at their whim. It's basically you trading against your broker. Not exactly in your best interest. They are not regulated like other markets...not until recently from what I recall.
There are a few that are trying to narrow the spread and make things more consistent with spreads. If your edge in trading is high enough to beat the spread, then you're going to perform okay until you start losing your broker money. Then they might start fooling around with your executions to get rid of you...it's just like a page out of Reminiscences of a Stock Operator.
A better idea is to trade with a Direct Market Access broker like IG Markets or Interactive Brokers. Interactive Brokers seems to be a pretty good choice for small accounts because they have the lowest commissions (that I've seen) on stocks. IG Markets offer direct market access as well a market maker trading platform; both of which are second-to-none in their respective classes.
Perhaps you can find your edge, find a broker that you can tolerate, then switch to someone else when you have money. I say that with tongue in cheek because you have to be a great trader from the beginning not to undergo the emotional hang-ups one simply needs to go through at the beginning. At least with 4K, you can blow out your account with a small amount. I'm serious about this. I have never seen someone start trading and become successful right away. It's my opinion that you're better off starting out with what you have, and sticking with the markets that are tradable with a small account. If you are going to make mistakes as a beginner, and it is so much better to commit those mistakes when the overall loss is comparatively small.
Questions and Answers
Article Tags:
spread betting
,forex trading
,cfds
,trading with a small account
,financial markets
,stock market trading
,forex broker
,contracts for difference
The Forex currency market is a non-centralized exchange where banks, businesses, governments, investors and traders can trade currencies with one another. By "non-centralized" I mean there is no actual physical centralized exchange like the New York Stock Exchange or the Chicago Mercantile Exchange. Instead...
The fully automated service sends an email confirmation in receipt of the amount and then processes the order. Among the reputed agencies to order foreign currency from is Pawnbroker.
Created by David Lambert, the CCI was first used as an indicator for determining reversal points in the Commodities Markets. It was then discovered to be very useful in the share and forex markets. It is based on the theory that all activities move under the influence of cycles. The Maxima (+100) and the Minima (-100) occurring at regular intervals. The CCI measures the speed of price fluxuations as determined by oscillators.
Credit card services are important to help your business increase sales. Consumers today are more comfortable than ever to pay in means other than cash. Plus, many customers don't keep a high volume of cash on hand. Credit cards allow people to pay back expenses over time.
A merchant cash advance is a cash payment to a business in exchange for an agreed upon percentage of future credit and/or debit card sales. This relatively new industry provides business owners quick access to capital coupled with benefits not see with traditional loans.
Barclays have always charged more for telephone deals. I have managed pretty well by placing limit orders when quote and deal does not work, but Selftrade make you send the order to a dealer which I have so far avoided. So now Selftrade has decided all of a sudden to impose a £40 fee for trades conducted over the phone!
We often hear about the downsides of short selling and its even worse cousin - naked short selling. But what's the difference between short selling and naked short selling and are there any benefits of naked short selling? By referring to short selling, I'm making reference to a speculative play on a stock (specifically, betting on the stock price going down), rather than short selling for hedging or market-making purposes. S
It is hard to devise sound trading system that works on the long term, especially trading systems or strategies designed to work with one forex pair only. The markets seems outsmart any possible indicator. It doesn't seem to be any fixed rule about each indicator, like for instance 'enter at a bollinger band cross.
The CityIndex site is divided into various sections with plenty of emphasis and explanation of how financial spread betting works and how to get started. I'd say that the City Index site and trading platform is fairly user friendly especially after the last revamp of the site earlier this year. CityIndex says that it is happy to welcome the smaller clients although the website admittedly does not make it entirely obvious what it defines as small.
Discuss this Article
