Beginner Forex traders are going to want to make sure that they lean into this kind of investing by trading lots. Finding the right lot size is a big piece of the success puzzle.
Lot sizes vary (sometimes pretty significantly), and it’s critically important to understand the kinds of lots you are investing with – as it’s going to significantly impact your potential profit and give you insight into the risk your taking on as well.
But what if you are just beginning in the world of Forex and are only looking to trade $200, for example? What lot sizes good for $200 Forex account trades, if any?
On a $200 forex account you should be using no more than 0.02 lot size. If your stop loss is large, in pips, you’ll need to be using a lot size of 0.01. If you’re trading with a very small stop loss, in pips, you could use a lot size of 0.03.
What Lot Size Is Good For $200 Forex Account?
When trying to figure out what lot sizes good for $200 Forex account holders (usually beginners that want to sort of get the lay of the land in the Forex world) it’s important to think about the kind of margin you’re going to be working with.
One of the biggest mistakes that newbies Forex traders make – and it’s one that they make all the time – is capitalizing on every single bit of leverage offered by a broker, even when they know they probably aren’t ready for it.
Think about it kind of like this:
Imagine that you are 18 years old trading again and a credit card company says you can have a limit with $250,000.
At first you are going to want to leap at the opportunity, saying to yourself that you’ve never go crazy and max it out and that you to act responsibly.
If you were to take a step back, though, you’d probably realize that that $250,000 limit might be a bit of a challenge for a young person to handle right out of the gate – and maybe you’d like a limit a little lower to avoid dealing with that temptation.
The kind of temptation that could wreck your financial future right out of the gate.
Skyhigh leverage and a ton of margin from a Forex broker as a new trader is a lot like that.
This is why so many recommend that Forex traders with $200 go for a 50:1 leverage play – sticking to about 2% margin or so.
Some even like to recommend a 25:1 leverage play (1% margin) just to make sure that risk is really mitigated and managed when you are just getting started.
If that’s the approach that you decide to take you need to understand the lots you are going to be limited are generally under the “small increment” or “micro lot” position.
- A standard lot in the world of Forex is good for $100,000.
- A mini lot in the Forex world is good for about $10,000.
- A micro lot is good for about $1000 (notional).
What lot sizes good for $200 Forex account holders?
That micro lot!
How Much Should You Risk Per Trade on a $200 Forex Account?
So how much should you risk per trade when you are dealing with a $200 Forex account?
Well, that’s a real individual choice and comes down to a couple of things.
For starters, what are your investment goals trading in the Forex world to begin with.
Are you looking for quick cash and short positions?
Or are you looking for longer positions that may take a wild to mature, but have the potential to unlock significantly larger profits.
Maybe your goals are somewhere in between – or something else entirely!
Those goals are going to heavily inform how much you need to be risking on all of your trades when you’re funding your account with just $200.
For instance, if you’re scalping the forex markets, you’ll have a smaller stop loss and be able to use a larger lot size. On the flip side, if you’re swing trading, you’ll have a much smaller lot size as this risk will be split across more pips.
Secondly, you need to think about the lot size that you are shooting for.
As we mentioned a moment ago, most people trading with $200 in their account are going to want to focus almost exclusively on micro lot positions.
With a 2% margin/leverage position on a micro lot you are looking at risking four dollars every single trade.
Obviously, you need to make sure that you have stop losses in place to protect your nest egg as well. All it takes is a single margin call at 2% of $200 to wipe out almost all of your money – a margin call at that point would have you forking over $194 (and your four dollar position), leaving you with just two dollars left.
Using Lot Size Calculators in Forex
Most quality Forex brokers are going to give you access to lot size calculators, helping you better understand the kinds of lots you should be looking for with the money you have available, the kind of leverage that you are willing to risk, and the stop loss positions you’re looking for.
These lot size calculators are game changers!
They give you all of the information and insight you need to know to better understand the kind of lot sizes to shoot for, the amount of money you’ll be putting up (and risking) should a margin call occur, and a whole host of other details that make it a lot easier to trade Forex – especially if you want to trade someone aggressively with a smaller budget.
Take advantage of these tools at every opportunity.
If you can’t find a calculator like this with your broker you’ll want to jump online and search for lot size calculators that are 100% free and provided by legitimate Forex operations. I’d highly recommend using the free lot size calculator from Babypips.
Don’t go with Forex calculators from fly-by-night companies or websites or operations outside of the Forex world. They may not be providing you with the most accurate and up-to-date information available.
That could get you into positions that you wouldn’t have jumped aboard otherwise.
No, use legitimate calculators and you’ll have nothing to worry about!
There are also ‘in app’ calculators that actually sit on your chart in the Metatrader 4 platform. I’d recommend having a look into TraderOnChart – this is the tool I used to calculate the exact lot sizes I needed for my $200 account.
In Conclusion – What Lot Size Should You Be Using For A $200 Balance Forex Account?
In summary, you should be using a lot size of 0.02 for the majority of trades on a $200 balance account when Forex trading. This will give you a maximum position size of $4 per trade, meaning that your risk on any given trade is limited to $4. You should also be using stop losses to protect your account equity in case the market moves against you.
Lastly, make sure to use a quality Forex calculator to better understand what lot sizes you should be using for your account balance, your investment goals, and the level of risk you are willing to take on. These tools are crucial for success when trading Forex with a smaller account balance.
What’s the most you’ve ever made from a $200 account? Let me know in the comments down below.