Trading does not always require a lot of financial means. You don’t need to invest a whole lot of money to make a profit. For the beginning trader who still needs to learn a lot, it can be very interesting to start trading on a budget with little money. How does this work?
Get started on a small budget?
You can get started right away, even if you don’t have a lot of money to invest. You can do this by trading with a broker:
- You receive a demo just for signing up.
- You can trade CFD stocks, commodities and currencies.
- You can never lose more than your trading balance!
Set clear goals
If you want to trade with a small amount of money then this requires a certain amount of preparation. It’s a little different from when you invest a lot of money. When we talk about a small amount of money, we mean about 100 pounds or a few 100 pounds. Don’t think about thousands of pounds just yet.
Before you start to trade with a small amount of money, it’s important that you set clear goals. The exchange is volatile, so it’s important to have long-term goals. Once you’ve set your goals (for example, to trade for your pension), you will start to trade in a more focused manner.
If you want to trade with a small budget, then a CFD is a very good trading instrument that you can use to make a lot of money. If you trade with CFDs then you can leverage your stake by a certain factor. The benefit of this leverage is that you can open up a larger position than you can without leverage. In short, the larger the leverage, the higher the potential return.
Profit on a small budget
If you trade CFDs on a small budget the return on this product is usually a lot higher than trading products that have no leverage. In short the return on CFDs is measured based on the ratio of the leverage.
To give an example: if you use a leverage of 1:10, then your profit will be ten times as big. If you use a leverage of 1:30, then your profit will be 30 times bigger. This way you can increase your potential return greatly, even though you’re only using a small amount of money to trade with.
Most providers of CFDs require a minimum deposit of a hundred pounds. This means that you only need a few hundred to start trading. If you use a leverage of 1:50, you have a total available capital of 5000 pounds. You can also open up multiple positions with little money to spread the risk and widen the portfolio for more potential profit.
By doing this you spread the chances and increase the potential return. As a beginning trader it’s very possible to start trading on a small budget. You can do this to get better at trading, but you can also make a decent amount of money this way!