This is one of the questions I am usually asked. There are so many traders who have been learning and practising for several months or even years. Now, they are ready to open a live account and start trading with real money. But the problem is, they don’t have enough money to open a live account with a true ECN/STP broker.
As you know, 0.1 lot is the minimum lot size that true ECN/STP brokerssupport. The reason is that the true and real liquidity providers don’t support smaller lot sizes (micro lots), and, as true ECN/STP brokers are directly connected to liquidity providers, they transfer the orders directly to them, and if the orders lots sizes are lower than what liquidity providers support, they reject the orders.
Therefore, when you want to open a live account with a true ECN/STP broker, your account size has to be large enough to handle the minimum of 0.1 position. For example, if you open a $1000 account, and you locate a trade setup that needs a 100 pips stop loss, then the risk of taking this trade setup will be about $100 which is 10% of your account. Taking a 10% risk is too much, specially when you are a new live Forex trader. If you want to take a 3% risk with this trade setup, then your account balance has to be about $3,400 at least. But the problem is, some traders cannot afford to open a $3,400 account. I know some good and serious traders who have learned and practised enough and are now ready to start live trading, but cannot open even a $500 account.
Before talking about the real solution, I’d like to explain why you should not open a small live account with a true ECN/STP broker. Many of them allow you to open even a $500 account. But as 0.1 lot is the minimum lot size you can take, then you will have to take too much risk, and so, you can easily wipe out your account. Not only you will not be able to grow your small account, but you will easily lose that money. So, it is wasting of money to open a too small account that cannot handle the risk.
This is true that I always say you should start with an as small as possible live account, but I don’t mean a too small account that cannot handle the minimum risk you have to take. Your account has to be as small as possible, but it has to be big enough to handle the minimum possible risk.
The other thing is that, if you see a broker claims to be a true ECN/STP broker, but it offers micro-lots (0.01) too, it can have two meanings:
- It is not a true ECN/STP broker and it is market maker.
- It has ECN/STP and market maker system at the same time, and they put the small accounts in market maker system, and large accounts on ECN/STP, because it is usually the novice traders who open small accounts and most of them wipe out their accounts very easily. So, the broker wants to earn all the money that small account holders lose.
So, opening a too small account with a false ECN/STP broker, or a true ECN/STP that offers micro-lots is not the solution.
The last thing I’d like to tell you before talking about the real solution is that when you see you cannot open a live account with a reasonable account size with a true ECN/STP broker, you may decide to open a small account with a true ECN/STP, but instead of trading the long time frames that usually need wide stop loss orders, you decided to trade short time frames to have tighter stop losses to risk less. For example, while a 100 pips stop loss equals a 10% risk for a $1000 account, a trade setup with a 30 pips stop loss will have a 3% risk for such an account. And you can locate such trade setups on shorter time frames only. You can never take a position with a 30 pips stop loss on the daily or weekly chart.
Theoretically, trading the shorter time frames looks like a good solution. But it is terrible in reality. Trading the shorter time frames will be nothing but wasting of a lot of time and money. Before you come to this conclusion, you will waste and wipe out several accounts. You will stop trading short time frames after having a terrible back and neck pain (because you have to sit at the computer for several hours per day to trade the short time frames).
So, trading the short time frames is not a good solution. Forget about it: Forex Scalping Facts And Fictions
What if you borrow money from the others, trade with it, and pay it back when you made some profit? What if you ask the others like family members and friends to invest with you and allow you to manage their funds, so that you can open a big account with their money?
That is the most stupid thing a trader can do. Never even think about it. Even if someone, like your wife or parents offered you some money to help you open a big enough live account, you must refuse it immediately. The reason is that trading with the others’ funds creates some different kinds of emotions that prevent you from thinking and deciding properly. Therefore, you will make terrible mistakes and you will lose the money definitely. What will be left for you is the shame that will remain forever. You will feel guilty because of losing the others’ money. Never even think about it. It needs several years of successful and professional live trading to be able to manage the others funds and account. You will have a long way to reach that level. Even, 99.99% of the too professional and experienced traders don’t agree to trade with the others’ funds.
So, forget about this terrible solution too.
What Is the Real Solution?
There is a great and hassle free solution for this small problem. Yes, this is a very small problem from my point of view. It is not even a problem. It is an opportunity. Indeed, you are lucky if you don’t have enough money to open a reasonable live account with a true ECN/STP broker. It is a chance for you to keep on demo trading and mastering your trading system even more.
As long as you don’t have enough money to open a reasonable live account, you should keep on demo trading and practising your trading system, and saving money at the same time. No matter how long it takes. There is no rush. Keep on demo trading and saving money. When you have enough money, you can open a reasonable live account while you have already banked a lot of experience through demo trading. You are much luckier than the others, because you start live trading when you have already mastered your trading system perfectly, whereas many others who have enough money, start live trading when they are not ready for it. So they lose a lot and usually many of them give up on Forex trading.
As you see, sometimes having money is bad luck. Sometimes it is lucky to have no enough money.