Trading Story: What happens If you trade with just $100?

Trading Story: What happens If you trade with just $100?

Trading Story: What happens If you trade with just $100?

With a simple forex trading system in place to help you trade this highly profitable and risky market, you will find that it is crucial to be able to transfer the money in the initial deposit the trader places on the forex system of his choice. Many novice traders apply and use automated systems, and expect to receive returns in the evening, once they have placed a small amount within certain margins set by this automated forex system.


What happens If you trade with just $100?


Since margin trading allows the trader to open their positions with a small amount of money, it is sure to start trading forex with a deposit of $100.


But is this so real?


Let's see what happens if you do that.


In this trading story, the trader's forex broker has a start margin level of 100% and a stop level of 20%.

Read Also: Here are 6 tips on how to start trading forex with $100

Steps to trade with just $100


Now that you know the Margin Call and Stop Out levels, let's see if trading with $100 is easy to do or not.


First: Deposit your money in the trading account

Your account balance: Since you are a beginner trader, you will be depositing $100 into your trading account. And you have in your account the amount of 100 dollars.


Second: Calculate the required margin

If a trader wants to sell EUR/USD at 1.20000 and wants to open a position of 5 microlots (1000 units x 5). The required margin is 1%.


The question here is how much margin will a trader need to open a position?


Trade with just $100 Depending on whether a trader's trading account is denominated in US dollars, he needs to convert the value of the euro currency into the US dollar currency in order to know how to determine the face value of his trade.


Value: 1 euro = 1.20 dollars


The sum: 1,000 euros x 5 micro lots = 5,000 euros


Transfer: 5,000 euros = 6,000 dollars

So the face value is $6000.


Now you can calculate the required margin as follows:


Margin Required = Nominal Value x Margin Requirement


$60 = $6000 x .01

Let's imagine that the trader's account is denominated in USD and since the required margin is 1%, the required margin will be $60.


Third: Calculate the used margin well


Used Margin Apart from the trade we just entered, there are no other open trades.

Given that the trader has only one open position, the margin used will be the same as the required margin required to trade with just $100. .


Fourth: Equity Account

Imagine with me that the price has moved slightly in favor of the trader and that your position is currently trading at the breakeven point.


The result of this is that the floating profit/loss is $0.


Let's calculate the equity of the trader:


Equity = Balance + Variable Profit (or Loss)


$100 = $100 + $0

The trader's account balance is now $100.



Fifth: Calculate your free margin

Now that the trader knows the equity, while trading trade with just $100 he can now calculate the margin available to him:


Free Margin = Equity - Used Margin


$40 = $100 - $60

Free margin $40. 


Summary


Finally, today we have talked about What happens If you trade with just $100  Whichever simple forex trading system you choose, it will ideally give you the tool that lets you know what other traders are trading by displaying their trades, we hope this is useful and for more follow us.


Source: www.investopedia.com