Open XM's Micro account. Table of Contents
Starting Forex trading with only 5 USD?
In recent years, the word FX has come to be heard often, and many people have seen the phrases “starting with a small amount like 5 USD or 10 USD” and “FX trading using pocket money”.
But how much money do you need to start FX?
There are many people who have the question.
The actual amount of money required varies depending on the investment style and the desired return.
Therefore, this time we will introduce the example of amount of funds necessary to start Forex trading together with the reason.
Make sure that you know how much money you will need to get close to your ideal Forex trading.
Open XM’s Micro Lot Trading account
XM offers Micro trading account which lets you trade with “Micro Lot”.
XM’s micro lot size is 1,000 units.
The available trading volume on XM’s Micro account type is from 0.01 lots to 100 lots per position.
With XM’s Micro account, you can trade from extremely small trading volume, for low risk low return investment.
XM’s Micro account is suited for traders who are just getting started, or traders who want to invest small amount.
To open XM’s Micro account and start trading, you only need to deposit at least 5 USD, or equivalent amount in other currencies.
Are you interested in trading with one of the most popular online Forex and CFD brokers?
Start with the Micro account type and try out XM’s exceptional trading conditions.
What is the FX trading unit?
In order to think about the necessary funds for FX trading, it is first necessary to know the “transaction unit”, which is the unit for trading FX.
The currency unit specified for each Forex broker is used as the transaction unit.
This refers to the amount of currency per unit “When trading, please use this amount of currency per unit.”
This currency unit is determined by each FX broker.
The currency unit is roughly divided into 4 types, 10000 units, 1000 units, 100 units, and 1 units.
The minimum required funds would be the largest for 10000 currency units and the smallest for 1 currency unit.
In case of XM, the standard lot is 100,000 units and micro lot is 1,000 units.
How to calculate the required funds for trading FX
The minimum required funds are calculated based on “the amount of currency per unit x the exchange rate of the currency purchased”, but in FX, you can reduce the required funds by using a mechanism called leverage.
Leverage in FX is a mechanism that allows you to trade more money than you have by depositing funds in FX accounts as collateral.
This collateral is called “margin“.
Margin is very important for adjusting your own leverage ratio.
In case of XM, the leverage can be applied up to 888 times, which is almost 2 times higher than other Forex brokers.
In other words, you can trade up to 888 times your own money.
Therefore, if you use leverage, you can obtain the required funds by “currency unit x exchange rate of currency to buy ÷ leverage ratio”.
It is often said that FX can be started from a small amount, thanks to this mechanism called leverage.
Also, when using leverage, check your margin against your risk tolerance.
How much you should invest for Forex?
Now, let’s explain about the amount of money that should be actually deposited, with the transaction unit and leverage mechanism suppressed.
As an example, let’s take a look at the funds required to trade EUR/USD.
1. 1,000 units are recommended for 100 USD
If you want to trade from 100 USD, 1000 currency units are recommended which you can utilize on XM’s micro account type.
As an example, let’s take a look at the funds required to trade EUR/USD in 1000 currency units.
For an FX company whose minimum trading unit is 1000 currency units, it means that the trading is $1000 per unit.
Assuming that the exchange rate of the EUR/USD is 1.08 USD, the minimum required fund in 1000 currency units is:
1.08 USD × 1000 currency ÷ 888 (leverage ratio) = about 1.2 USD
However, there is a system called “forced Stop Out” for FX trading, and when the amount of funds remaining in the account falls below a certain level, all open positions are forcibly settled.
And the loss at that point is realized.
Therefore, it is necessary to avoid forced stop out as much as possible.
In order to prevent this stop out, it is necessary to deposit the amount of money that will not be stop out into the FX account even if the exchange rate fluctuates to some extent.
Considering this point, the required funds can be estimated as “Minimum required funds + Unrealized loss caused by fluctuation of exchange rate”.
For example, when making a day trade of “EUR/USD”, it is common to deposit funds that will not stop out even if the exchange rate fluctuates by 5 cents.
Taking this idea into consideration, the standard of funds required for 1000 currency units would be:
$1.2 + (5 cents x 1000 currencies) = 51.2 USD
In other words, when trading in 1000 currency units, there is a certain amount of margin with about 100 USD per unit.
Therefore, for those who want to start FX from around 100 USD, choosing an FX company with “1000 currency units” makes it easier to balance your own funds and risk.
Open XM’s micro account and you will get the trading condition with 1,000 units per lot.
2. 100,000 units are recommended for 10,000 USD
In the case of 100,000 currencies, the amount of currency per unit will be 100 times higher, so the required funds will be approximately 10,000 USD.
In other words, the size of the currency unit and the standard of the required funds per unit are proportional.
100,000 units per lot is the standard size for XM’s Standard, XM Zero and Ultra Low Spread account types.
If you can prepare 10,000 USD or more of required funds, you can choose an FX company with 100,000 currency units to pursue even greater profits.
Also, even if you select an FX company with 1000 currency units and trade with 10 units, you can aim for the same return.
But this is just a guide.
If you are worried about stop out, or if you are thinking of medium- to long-term transactions, please try to prepare funds with more margin than the required funds introduced.
From the conclusion, it is recommended to trade with “1000 currency units” for those who are new to FX.
With 1000 currency units, the minimum required fund is easy to get from about 50 USD, and if you can prepare about 100 USD, you can reduce the risk such as Stop Out.
If you can get accustomed to movements such as charts by trading 1000 currencies and learn how to make profits and control losses, you can aim for a large return by increasing the number of trading units in the future.
For these reasons, trading FX with 1000 currency units is suitable for beginners of FX.
Therefore, when choosing a Forex company, we recommend that you select a company whose currency unit is 1000 currency or less so that you can trade 1000 currencies like XM.
XM also offers various bonus promotions that you can benefit for free.
Visit the page here to see the list of XM’s all bonus promotions.
Please check XM official website or contact the customer support with regard to the latest information and more accurate details.
XM official website is here.
Please click "Introduction of XM", if you want to know the details and the company information of XM.
IronFX
Comment by Diletta
March 26, 2024
Awesome bonuses, good leverage. A few hiccups, but support rocks!