How to trade with no money

Finally, now that you have selected a forex broker to trade with it is recommended to first open a demo trading or a practice account.

Top forex bonus list

How to Start Trading Forex (4 steps), how to trade with no money.

Most forex brokers offer unlimited demo trading account (but will be deactivated if not used for 30 days). This is a good way to get acquainted with the forex markets and also help you to understand your trading style (scalper or intra day trading, swing trading, etc) and approach (fundamental or technical analysis). You can search for various trading methods and systems or you can develop one yourself when you have a good understanding of technical or fundamental indicators. Placing orders (how to buy and sell): in forex trading, it is possible to either buy or sell any currency pair. Most trading platforms, give you this option. You buy when you think that price will go up and you sell when you think that price will fall. There is a common terminology used in forex trading, which is buy low, sell high, which is an important point to remember. ( read more how to place orders with MT4 )

How to start trading forex (4 steps)

Welcome to the world of forex. There might be many reasons why you are reading this article. It could be that your friend or acquaintance mentioned about how they trade and perhaps even make a living by trading forex. Whatever your reasons may be; this article will give you an overview of the forex markets and how to start trading forex … and perhaps make money for yourself.

Step 1. What is forex?

Step 2. Learn forex basics

Step 3: find a forex broker

Step 4: start trading

Step 1. What is forex?

Forex, or foreign exchange is an unregulated market, also known as OTC (over-the-counter) and is the biggest market with average daily turn-over that runs into billions. It is even bigger than the US stock markets. Although due to its OTC nature, no one can really give the correct numbers as to the forex turnover. But nonetheless, forex is indeed a big market and thus allows many market participants. From your neighborhood bank to specialized investment companies, to your friend; the forex markets always offers a piece of the action whoever you are and wherever you are (even from your home).

The basic concept of trading forex is very simple. You trade or speculate against other traders on the direction of a currency.

So, if you believe that the euro is going to rise, you would BUY the euro, or SELL the euro if you think the euro would fall. It’s as simple as that.

Step 2. Learn forex basics

Before you get ready to deposit your funds and start trading there are some important points you must understand, each of which are outlined below.

Forex brokers: in order to start trading forex, you will need to trade with the help of a forex broker. There are many forex brokers out there today who allow you to open a forex trading account for as little as $5. The forex broker is the one who facilitates your buy and sell orders and also allows you to research into the markets (also known as technical or fundamental analysis) to help you make more informed decisions… and of course allows you deposit more funds or withdraw your profits when you want to. ( click here to see our forex brokers rating )

Trading platform:you need a trading platform from which you can place your trades, which are then sent to the broker for settlement. Also, a trading platform is essential for you to conduct your technical analysis and also to see the current market prices. Most retail brokers offer the MT4 (short for metatrader 4) trading platform, which is free of cost. You can also open a demo trading account and practice trading with virtual money to gain the experience required before trading with real money.

Forex trading hours:while you might have heard that the forex markets never sleeps, it actually does. Firstly, you won’t be able to trade on weekends (saturday and sundays). But for the rest of the week, the forex market operates 24 hours a day. This is due to the fact that forex trading is global. At any point in time, you will always find an overlap of a new market session while the previous market closes. What time of the day or which market session you trade plays a big role if you are an intra-day trader or a scalper. This is another vast topic, which we will cover at a later stage. ( click here to learn more about forex trading hours . )

Now that you have a basic overview of the forex markets, here are some final pointers to remember before you start trading for yourself.

What is a pip?:pip is a measure of change in a currency pair’s value and is the 5 th decimal. For example, if EURUSD changes from 1.31428 to 1.31429, the change is denoted as 1pip (1.31428 – 1.31429 = 0.00001). When you trade, the more pips you make, the more profit you have. Ex: buying EURUSD at 1.31428 and selling (or closing your trade) at 1.31528 would give you 100pips in profit. ( read more about forex PIP )

Reading quotes: forex quotes are presented in a bid and ask price (both of which vary by a few pips and from one broker to another). The bid price is the price at which you can buy and the ask price is the price as which you can sell. So, a EURUSD quote would look like this 1.31428(bid)/1.31420(ask).

What is a spread?: spread is nothing but the difference between the bid and ask price. So in the above example, for 1.31428/1.31420, the spread would be 8 pips. ( read more about forex spread)

What is a leverage?: leverage is the amount by which you can request your broker to magnify (or increase) your trade value. Leverage is often quoted in ratios such as 1:50, which means that when trading on a 1:50 leverage, your $100 is magnified to $50000. Leverage is a big topic in itself and it is recommended to read this article to learn more. Leverage is important both in terms of making profits as well as managing risks and therefore, your trades.

What is a lot?: A lot is a unit by which you place your trade. In financial terms, a lot is also referred to as a contract. There are preset lots (or contract sizes) that you can trade. For example a standard lot is nothing but 100,000 units (known as 1 lot). ( read more about lot)

Reading charts: the ability to understand and read the charts is very essential to trading. Depending on your approach, you can choose between a line, bar or candlestick charts and trade accordingly (for example trading based on candlestick patterns). ( read more how to read forex charts)

Placing orders (how to buy and sell): in forex trading, it is possible to either buy or sell any currency pair. Most trading platforms, give you this option. You buy when you think that price will go up and you sell when you think that price will fall. There is a common terminology used in forex trading, which is buy low, sell high; which is an important point to remember. ( read more how to place orders with MT4 )

Order types: besides buy and sell, another point to remember the types of orders. There are two basic order types: market orders and pending orders. When you click on ‘buy’ or ‘sell’ you are basically buying (or selling) at the current market price. A limit order on the other hand tells the broker that you want to buy or sell only at a particular price. ( read more about types of forex orders)

Step 3. Find a forex broker

As mentioned, there are many forex brokers today and therefore it can get confusing on how to choose the forex broker that is right for you. To briefly summarize, remember the following points while choosing a forex broker:

Look for a forex broker that is regulated

See if the forex broker offers a minimum deposit amount

What is the leverage that the broker offers

What is the minimum contract size that you can trade

Bonuses and the terms and conditions (see on our site list of forex deposit bonuses and forex no deposit bonuses)

Deposit and withdrawal types as well as the terms and conditions

Trading methods that are allowed by the broker

We can also help you choose a forex broker by reading our article how to choose forex broker

Step 4. Start trading

Finally, now that you have selected a forex broker to trade with it is recommended to first open a demo trading or a practice account. Most forex brokers offer unlimited demo trading account (but will be deactivated if not used for 30 days). This is a good way to get acquainted with the forex markets and also help you to understand your trading style (scalper or intra day trading, swing trading, etc) and approach (fundamental or technical analysis). You can search for various trading methods and systems or you can develop one yourself when you have a good understanding of technical or fundamental indicators.

Conclusion:

Forex trading is one of the most active and dynamic ways to trade the financial markets. At the heart of everything, it is the basic fluctuations in currency values which drives everything else. Learning to trade forex and understanding the forex markets can give a good foundation to trading other markets such as derivatives or equities.

How to trade with no money – paper trading explained

Trade without money? Is it really possible?

I am very sorry to say that there is no real way of earning real money through trading in the stock market without any capital. Risk and profit only go together. You can not make money without risking some. That is just how the market works. There is nothing you can do about that. But before you leave, I can tell you that there may actually be a way of investing into the market without capital. Ever heard of paper trading?

What is a paper trade?

Paper trading requires no starting capital at all. That is because (virtual) paper trading is trading with fake or virtual (paper) money. This means that all your risk is fake and only virtual. This of course also means that all your profits from this paper money are only on paper or virtual as well. This may sound boring to some, but it really is not. There are plenty of benefits of paper trading, especially for beginner traders. Nevertheless, paper trading does not necessarily translate into real trading just as good as some think it does. Just because you are profitable in a paper trading account, does not mean that you will be profitable in a real live trading account. There are a variety of reasons why this is the case. I will try to break down the advantages and disadvantages of paper trading, as well as the way I would recommend someone to use paper trading.

Should you paper trade?

There are plenty of benefits to paper trading. But this does not mean that paper trading is perfect, paper trading also has some disadvantages.

Probably the greatest benefit of paper trading is that it carries no risk whatsoever. Theoretically you can do whatever you want. No matter what happens with your paper trading positions, you won’t lose any real money. Therefore, paper trading is a great way of practicing your trading activities.

Additionally, paper trading gives you a great introduction to trading. It gives you the opportunity to put what you learned in theory into practice without risking anything.

Not only is paper trading a good introduction to trading, but also a great introduction to a trading platform. When you sign up to a new broker and don’t know the trading platform that well yet, paper trading is a great way of getting to know it. With paper trading you can easily learn how to use and navigate through everything allowing you to make mistakes that don’t cost you money.

Even though paper trading is a great practice medium, it nevertheless is not the same as real trading. Every real trader will tell you that. No matter how serious you try to take it, you will never paper trade exactly like you would trade with real money. This is because you automatically have a different mentality when you are trading with fake money. A human being acts totally different when his/her hard-earned money is at risk. Paper trading is much more forgiving and therefore you will act much less caring.

Paper trading has unlimited retries. This may be a good thing when practicing, but you don’t have any retries when trading with real money. This again will create less respect for the money and therefore will lead to a different trading behavior.

Furthermore, many platforms handle paper trading accounts much differently than they handle their real trading accounts. This of course does make sense in some cases. But it doesn’t necessarily make sense in things like commissions and filling times. Usually orders will get filled much faster in paper trading accounts. Some order that get filled in paper trading accounts, would never get filled in real live trading accounts. The same applies for commissions. Many paper trading platforms either do not have commissions or have very cheap commissions. This creates another unreal trading environment.

Another drawback of paper trading is that it is mostly used on a short term basis. When someone uses paper trading to test out some strategies, he or she normally uses it no longer than a few weeks to months. This is not enough to really see if a strategy is profitable in the long run. Additionally, because paper trading only uses fake money, people just want to try out things fast and see if they work. Understandable, no one wants to sit around and wait many months to see if his/her virtual money would actually create a virtual profit.

A final big downside of paper trading is that you can not really acquire a good trading mentality. This is one of the things that only can be done through real trading. The emotions of human beings are naturally attached to things that mean a lot to them. Money is one of these things. But there is no way to really get emotionally attached to fake/virtual/simulated/paper trading money. Therefore, paper money losses won’t affect someone as much as real losses would.

Conclusion

Even though paper trading is far from ideal and does not simulate real trading perfectly, I do think that it is a great learning tool and therefore I do recommend it. There really is no real reason why one should not try it. It does not cost anything and it is risk free. One really has nothing to lose when paper trading. I think it is a perfect way of getting your platform and trading to know.

Where to paper trade?

There are many different ways to paper trade. For example, you can paper trade with real paper by writing you entry and exit prices down or you can use an online program or you can use your broker platform. Most (good) brokers nowadays do offer paper trading. Usually they allow you to easily switch between your actual live trading account and a virtual trading account. If your broker does not offer this, you may want to consider changing your broker (here are some recommendations) or you have to find an online platform.

I would most definitely recommend using your broker to paper trade. Paper trading with actual paper really is just so much more complicated and unnecessary. Furthermore, it takes away some benefits of paper trading. Besides, many people would easily cheat when paper trading with actual paper, because it is so easy to cheat.

The reasons why I do recommend that you use your broker to paper trade are, because you will get to know this exact platform, which helps you mitigate later mistakes with real money. Moreover, it is just an insanely easy way to paper trade. You won’t have to keep track of anything. The broker will automatically handle everything. They will treat you very similarly to a normal trading account. (furthermore, it can be quite hard to keep track of the P/L of a complex option strategy/spread and portfolio).

How to paper trade properly?

I would say the way you should paper trade really depends on the reason why you want to paper trade in the first place.

If you want to get to know your broker platform and navigating/using it:

I would recommend that you try out as many things as you possibly can. Don’t actually think about your paper trades, just try to order different positions, strategies at different prices to learn how to do that. Additionally, try to understand everything you see. Try to understand your portfolio performance and all the other readings. This will help a lot in later real trading activities. Understanding your personal broker platform is essential and paper trading is a great way to do this. But again, if this is your goal, you should try not to think about the fake money and making a profit with it. Just try out as many different things and get used to the platform. If you do this, you will easily learn the platform by doing stuff. This is one great way to use paper trading, because you could/would never do this with your real money.

If you actually want to test a strategy: (for example my consistently profitable strategy. To learn more about my strategy, click here)

You should try to set all the starting criteria as close to the actual one. With this I mean that you should set your starting amount to your actual real starting amount and actually do trades the same way you would with real money. To ensure that you don’t use more money than you actually could, I highly recommend that you delete the rest. If you can’t do this by yourself, you could contact your broker real fast and they would do it with a pleasure. When testing this new strategy, you should try to act as real as possible. This can’t be done to a full extent, but it can certainly be done to a certain degree. What this means is that you take your time before every entry, don’t allow for any retries and don’t make up any excuses. I often find when paper trading and testing things if I lose I tell myself that the loss just was an exception or I just made a wrong entry. Do not do that. Count every loss and look at your overall P/L. To make it as realistic as possible you could ask yourself, if you theoretically would make this trade with your actual money, before every entry. Don’t think of the fake money as fake money. Act like you care, even though that can be harder than you think. But if you test out a strategy with a ‘not caring mentality’, it won’t be a good test of this strategy, because you didn’t test it the way you would later use it.

Paper trading inside of optionshouse broker platform

Nevertheless, no matter what you do, paper trading still won’t be the same as real trading.

How long should you paper trade before trading with real money?

Many people ask how long one should paper trade, before moving on to real trading. I don’t think there is one correct answer to this question. It also really depends. But I would say that before trading with real money, someone should definitely know his/her broker platform if you now learn how to use your broker platform through paper trading or not, is still up to you. Otherwise, I would say that it depends on if you feel ready for your first real trade. But I would not necessarily say that one has to have had a specific percentage gain in paper trading before trading real money. In the end it really comes down to when someone feels ready and prepared.

Can you paper trade options and other derivatives or only stocks? – virtual options trading

Paper trading is not only a good way to practice stock trading with fake money, but it is also a great way to get into other types of trading. Nowadays everybody can paper trade with ease. No matter if you are an option, futures, forex or whatever kind of trader, you will be able to paper trade options, paper trade futures, paper trade forex etc. Most brokers allow you to do that.

4 replies to “how to trade with no money – paper trading explained”

What a great explanation of paper trading. Whether it’s stocks, options or futures, there are ways to paper trade and what this really means is that you have an opportunity to PRACTICE ! Sure, you may not be a free swinger when using your own money, but you will have some knowledge of how the markets work and this leads to confidence. As in anything, confidence sends you into the arena with your eyes wide open.

You are absolutely right.

Excellent information and something I have tried in the past. Sadly I found that the reality between paper trading and real-time trading with your own money were two completely different beasts. It was, and is, an excellent way of learning the platform interface without the worry of making mistakes but not, in my opinion, for testing out strategies.

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How to start trading forex with no money down

Forex is the biggest fiscal market in the world with trades of $5.3 trillion dollars happening daily.

If you’re ready to start trading forex but want to do it risk-free, you’ve come to the right place. We’ll explain how to start forex trading without a deposit.

What is forex?

Forex, short for foreign exchange, is a market that is larger than the US stock markets. The daily volume of forex trading is 53 times more than the new york stock exchange.

In a nutshell, you buy and sell currency to make money. If you think the euro is going up, you choose to buy euro. If you thought it was going to lower in value, you would sell. Simple, right?

Start trading forex

A lot of people are hesitant to start trading forex because of the risk. It’s not possible to make a high profit without investing some cash. If you want to earn the big bucks, you’ll need to deposit big money in an account.

Don’t be fooled by scams assuring you that you can make millions without risking a dollar of your own money. This is just not true.

However, if you want to get your toes wet just to get the hang of it, you can start forex trading without deposits of your own. Read these simple trading tips you should know before you get started.

Forex trading without deposit

All forex brokers allow trades to open up demo accounts. A demo account allows you trade the markets using virtual currency.

We recommend all newbie traders start trading on a demo account before risking their hard earn cash. The ugly truth is that if you can’t consistently profit on a demo account, than you have no hope of trading real cash.

Affiliate programs

Another option for a no investment forex trading is affiliate programs.

How this works is you attract new clients who want to do forex trading. You get a bonus for each client you bring in.

The terms of each affiliate program may vary. In some cases, you get paid regardless of how well the new client does in the market. Make sure you look at the terms to see how much you can expect to earn.

Your broker will transfer money into your account each time to bring in a client. You can then use the funds in that account for forex trading or withdraw them to your bank account.

Contests

Sometimes brokers arrange contests that are demos of forex trading. You would compete against other traders in a virtual account. Depending on how much virtual money you earn, you will win real currency as a prize.

Contests allow you to gain experience trading in forex in a safe, virtual environment. If you do well, you can use your prize money to start trading forex in real life.

Bottom line

We hope you enjoyed learning about how to start trading forex without using your own money. The options in this post are great ways that allow you to gain experience in the forex world without spending a dime of your own money.

It’s a great way to give it a try if you are not sure if forex trading is right for you. Though you won’t make a lot of money with these zero-investment options, you can gain experience for when you invest more money later on.

This article was researched and written in a collaborative effort by multiple sources.

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Forex trends: how to make accurate forex predictions for 2020

Affiliate disclaimer

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How to trade with a little money

6 tips to save using the most popular food delivery apps

While you can earn much money in the stock market, starting to trade does not have to be an expensive proposition. Regardless of how little money you have to initially invest in this wealth-building option, you can likely successfully get your start. If you are starting with a small amount of money, however, you may need to be a bit more careful with your choices to ensure that these limited funds stretch as far as possible.

Set a comfortable budget. Before you begin investing, decide how much you can invest. If you fail to set a budget before you start buying stock, it can be tempting to overextend yourself and buy more than you can really afford. When setting your budget, think about how much you can afford to lose. If you can’t afford to let the money go, don’t put it in the stock market.

Pick the right time. Timing is everything when it comes to stock market investment. Try to buy when the market is in a slump instead of buying on a high day. Your money can go much further during these slump periods.

Buy low-cost stocks. Instead of investing in a pricey and proven stock, look for low-cost stocks with growth potential. If you buy a low-cost stock, you can purchase significantly more shares for the same amount as you could buy only one share of a more expensive option.

Seek a low-fee service. If you are only investing a small amount of money, service fees can make a big difference for you. Before deciding upon a brokerage firm or online trading platform, carefully explore the fee structures associated with each option. Seek the option that has the lowest fees, as these fees can really eat into your profit if they are high.

Avoid panic selling. Because you haven’t invested your entire nest egg in the stock market, there is no reason to panic should the market dip. If you see your stocks drop by a few points, don’t rush to sell it. Instead, stick with it as it will likely rebound.

Reinvest your earnings. As you make money through your wise stock purchases and sales, don’t immediately pull this cash out, but instead reinvest to increase your earning potential.

Using paper trading to practice day trading

Day trading has become incredibly competitive with the surge of high-speed trading and algorithmic trading taking place in the markets. The good news is that many online brokers have enabled paper trading accounts to help traders hone their skills before committing any real capital.

Key takeaways

If you're thinking about becoming a day trader, it makes sense to get some realistic practice in first to test the waters.

Paper trading is a way to simulate trading strategies and see how they would have paid off, or not, in reality.

Online brokerage platforms increasingly allow sophisticated paper trading abilities through demo accounts or as a feature for its existing customers.

What is paper trading?

Paper trading is another term for simulated trading, whereby individuals can buy and sell securities without risking real money. While it’s possible to backtest trading strategies, traders may be tempted to use past information to make current trades—known as the look-ahead bias—while the wrong backtesting dataset could involve a survivorship bias. Survivorship bias is the tendency to view the performance of existing funds in the market as a representative sample.

Investors may be able to simulate trading with a simple spreadsheet or even pen-and-paper, but day traders would have quite a difficult time recording hundreds or thousands of transactions per day by hand and calculating their gains and losses. Fortunately, many online brokers and some financial publications offer paper trading accounts for individuals to practice with before committing real capital to the market. This allows them to test out strategies and practice using the software itself.

Setting up a day trading account

Day traders should ideally paper trade with the same day trading broker they plan to use for their live account since it will be as close to reality as possible.

As you look for the best place where to practice your trades, consider paper trading platforms that offer live market feeds before you start with real capital. This is important because you'll want to be able to trade without delayed feeds or processing orders.

Among the most popular brokers are interactive brokers and tradestation, which both have fully-featured simulators that even work using their automated trading rules. Day traders using these platforms will need to open an account to use the simulator, which may mean depositing the minimum funding requirements. The good news is that traders can use the simulator before making live trades with their capital.

Online brokers such as fidelity and TD ameritrade also offer clients paper trade accounts. Investopedia provides a free stock simulator that can be used for paper trading and for those looking to get started with a day trading account, investopedia compiled a list of the best stock brokers for day trading to make the process easier.

It’s important to keep in mind there are still some differences between simulated and live trading. On a technical level, simulators may not account for slippage, spreads or commissions which can have a significant impact on day trading returns. On a psychological level, traders may have an easier time adhering to trading system rules without real money on the line—particularly when the trading system isn’t performing well.

Paper trading tips

Day trading practice depends largely on the strategy that’s being used to trade. For example, some day traders are focused on "feel" and must rely on paper trading accounts alone, while others use automated trading systems and may backtest hundreds of systems before paper trading only the most promising ones. Traders should choose the best broker platform for their needs based on their trading preferences and paper trade on those accounts.

When paper trading, it’s important to keep an accurate record of trading performance and track the strategy over a long enough time horizon. Some strategies may only work in bull markets, which means traders can be caught off-guard when a bear market comes along. It’s important to test enough securities in a variety of market conditions in order to ensure their strategies hold up successfully and generate the highest risk-adjusted returns.

Finally, paper trading isn’t a one-time-only endeavor. Day traders should regularly use paper trading features on their brokerage accounts to test new and experimental strategies to try their hand in trading markets. Simple mistakes can be incredibly costly for day traders who risk tens of thousands of dollars in hundreds of trades per day. This makes paper trading an integral part of long-term success.

Pros of paper trading

Starting out with a paper trading account can help shorten your learning curve. But there are other benefits beyond just educating yourself. First, you have no risk. Because you're not using real money, you don't lose anything. You can analyze what mistakes you've made and help create a winning strategy. This also helps you build your confidence, allows you to practice techniques and strategies needed to be a successful day trader including profit or loss taking and pre-market preparation. Finally, it takes the stress out of trading. You can concentrate on your strategies in a relaxed environment and take the emotion out of trading.

Cons of paper trading

While paper trading will help give you the practice you need, there are a few downfalls. Because it doesn't use real money, you don't get an idea of how fees and commissions factor into your trades. These simulators also don't accurately reflect the reality of the markets, with the lows and highs and the emotion that goes along with trading. Thus, it's important to remember that this is a simulated environment as you get your trading skills in check.

Practice, practice, practice

If you're a first-time investor, take as much time as you can paper trading before you jump ship and begin live trading. Be sure to explore different strategies and new ideas so you can get comfortable. The idea behind using simulators is for you to get comfortable and cut down on your learning curve.

Once you feel as though you've mastered all that you can be using a simulator, try trading with a stock that has had a predictable run—with a lower price and a consistent response to market conditions. If you start trading with a highly volatile stock, it may be a challenge. But if you choose something safer, you can practice what you've learned without taking on too much risk.

The bottom line

Day traders face intense competition when it comes to successfully identifying and executing trade opportunities. Fortunately, most online brokers offer paper trading functionality that empowers day traders to practice their skills before committing real capital. Traders should take advantage of these features to prevent making costly mistakes and maximize their long-term risk-adjusted returns and performance.

Seven ways to invest in the stock market when you’ve got no money

A s the author of a blog about investing and getting richer, I’m keenly aware that most people who read money blogs are in debt and trying to stop themselves getting poorer.

It’s no coincidence then that the most successful personal finance blogs are about struggles to get out of the red.

Obviously that’s bad news for me, since it means far fewer potential readers of my writing.

But it’s also bad news for these debt-ridden folk.

Investing is like any other positive habit – you need to start investing early and repeat it often to see the benefit. The longer you put it off, the harder it will be to grow a nest egg to replace your salary or enable you to retire early.

With this in mind, here are a few ideas for how cash-strapped surfers who stumble upon monevator might start investing while funds are low.

(if you’re a debt or frugality-focused blogger or reader, please do pass on these ideas to others!)

Should you invest yet?

Before we start, I have to say that if you’ve got big debts on anything other than mortgage-level rates, you should get out of debt before you start putting money into the stock market.

It doesn’t make sense to be paying interest on a credit card of 20% when the average pre-tax return from shares over the long-term is 10%.

That said, I’ve even got a couple of ideas to help such people get acquainted with the ins and outs of investing before you’ve any real money. Read on!

1. Fund your investing first

Assuming you’ve simply got no money left at the end of the month – as opposed to debts to pay off – then your already in a better place than many. Congratulations!

Your next step should be to set up a direct debt to regularly take money out of your current account to a savings account earmarked for investment.

How much? I’d suggest 10% a month is a good target, but anything is better than nothing. (I’ve saved as much as 50% at times!)

Even 5% of your income might seem impossible at first, but commit to do it and you’ll find it’s possible.

If you have a pay raise or similar that you can redirect towards investing, it’s even simpler – redirect the whole increase to build up your investment funds.

2. Set up a paper portfolio

Before investing, you need to build up an emergency cash fund in case of any unexpected hard times. About three to six months income should do it.

In the meantime, discover how hard it is to beat the market picking stocks by setting up a demo portfolio using tools on sites like yahoo.

Or simply run a pretend fund in a spreadsheet or on a notebook.

Set yourself a fantasy investment figure of say £100,000 and put the money into shares as you see fit. Don’t forget to take into account commission fees, and the spread on the shares, as well as any taxes in your territory (0.5% when you buy here in the UK).

Every so often, compare your portfolio to an index such as the FTSE 100.

You’ll have a lot of fun, but you’ll probably not beat it after costs – meaning you’ll see the benefits of an index tracker early without wasting any real money chasing shares.

3. Join (or set-up) an investment club

Investment clubs are monthly gatherings of a dozen or more people who pool their cash and their ideas to grow a communal share portfolio.

They’re often done for sociable fun as much as for profit. With a monthly subscription of say £25, you may find your drinks’ bill at the monthly gathering equals your investment outgoings!

However, they’re a great way to learn more about shares. UK investors can find out how to set one up from proshares while US investors will find more information from the SEC here.

4. Start a modest monthly investment plan

In both the US and the UK there are so-called sharebuilder investment platforms that enable you to buy tiny amounts of shares cost effectively, provided you’re prepared to declare in advance what shares you want to buy and take the market price on the day your order is executed.

Another option is to put money into an investment trust, which here in the UK have savings plans that will accept as little as £50 a month in regular savings.

As I’ll show below how, even small regular additions can really add up over the long term.

If you can, choose an investment vehicle that’s sheltered from tax (here in the UK that means putting it into an ISA).

5. Open a spread betting account

Spread betting accounts enable you to bet on the direction of a share price.

Theoretically you could fund an account with just enough money to place a bet, open a position on a share price rising (or bet against a share you think is going to fall), and grow your investment pot from there.

In practice, the ups and downs will probably shake out any small positions sooner or later, and such platforms are also designed to encourage you to over-trade, which usually reduces returns.

I don’t think this is a good way to start investing. Spreadbetting can be used by experienced investors to avoid taxes, but in amateur hands it’s much more likely to produce losses. I’m including it only for the sake of completeness.

6. (possibly) seize control of your pension

Even though you’re short of cash, if you’re middle class and middle-aged you might well have built up a decent pension pot.

If it’s a personal pension and you’re disappointed by the returns compared to the market (or the charges levied on it), you could consider transferring it to a self invested personal pension (SIPP) and being responsible for its fate yourself.

Definitely talk to an accountant or financial advisor (and probably your employer) before doing anything like this though, and don’t be tempted to gamble away your retirement income on risky stock picks until you’re sure of what you’re doing!

For most people a cost-effective index-tracking pension is going to deliver the best returns.

7. Consider (carefully!) releasing some equity

Perhaps you’re quite well off but you’ve always put your money into bricks and mortar?

If you’re property asset rich but cash poor, you could consider using some of the equity in your home to underwrite a debt that you put into the stock market.

Remember, despite the positive sounding name – ‘equity release’ – all you’re doing is taking on debt that will need to be repaid.

The only reason the debt is related to your property’s value is it gives the bank security that if you fail to repay what you owe it can seize your assets. It’s not free money!

That said, given all the spendthrifts who remortgaged to release cash for holidays and new cars throughout the property boom, remortgaging to get a modest £10,000 to kickstart an investment programme seems to me a fairly responsible activity.

Do read my series on borrowing to invest, however, as even cheap mortgage debt needs to be invested carefully and cost effectively if it’s to deliver a positive return over the long term.

And finally: read, read, read

Perhaps the best thing you can do while you save up for your first investment is to learn more about investing.

There are loads of good books about investing (try oblivious investing) and you can also subscribe to monevator and other blogs to learn more about how to invest while you build up your warchest.

Remember, compound interest, which is so deadly when you’re in debt, is on your side when you invest.

An investment of just £50 a month started when you’re 30 could be worth £178,000 by the time you’re 65, assuming a 10% return.

If you delay starting until you’re 40, your £50 a month plan will net you just £65,000.

Make it your mission to start investing ASAP!

Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. Please do check out some of the best articles or follow our posts via facebook, twitter, email or RSS.

How can I trade with no money?

Don’t have £20k to invest? … or £5k …?

Are you fed up of hearing about trades who’ve made £1,000s each month off the back of their £50k pot?

The world has seen a backlash against the ‘elite’ and the privilege that allows the rich to get richer …

But what about the small-time investor? Who only has a few hundred pounds to invest?

Trading is often seen as a rich-man’s game. With the ‘cheap’ end of the market full of dodgy scams.

But, if you know which pitfalls to dodge, it’s perfectly possible to match the gains of much wealthier investors. These are the 6 key facts you need to know …

1 • don’t ‘take a punt’

Traders with small funds can easily be drawn into a gambler mentality. I often hare people tell me that they’ll trade with high risk, high stakes, just until they’ve made enough capital to bring down their risk to a sensible 2% level.

The result is (unlike most things in trading) very predictable … they get blown out long before they’ve achieved that level.

Conversely, traders with large funds tend to be more prudent (maybe that’s how they grew those funds). Just because your fund is small, doesn’t mean it’s expendible. This is your opportunity to build something really sizeable – treat it with respect.

2 • love every £10 gain

If you’re trading with £500 and your method brings you 3% at the end of the month … that’s an extra £15 in your pocket. You could be forgiven for wondering what the point is.

But that’s exactly the kind of return you should be looking to achieve – just keep plugging away and compounding your profits.

Yes, it’ll take you a few more years to reach your goal that someone who started out with £5k, but if you go in too hard, with high-risk, high-reward trades, you’ll never reach those goals at all.

So, don’t knock the £10s, the £20s … these are the small steps towards genuine wealth.

3 • reject the usual dross

Carrying on from my first two points … we want to avoid the high-risk promises of ‘easy money’ optioins that are peddled to small-time investors. I don’t know about you, but my inbox is full of them … just a few £1s invested … and you’ll have turned it into £10,000 by the end of the month.

The main culprits among these schemes are scalping strategies, which have high costs (often not factored into the profits promised). And, it’s true that sometimes these systems will have amazing runs, producing stellar profits … but they’ll also have downturns – and it’s these kinds of ups and downs that small funds just can’t weather.

Another popular choice for the ‘little guy’ is penny shares. These (as their name suggests) are dead cheap to buy and – if you get it right – could grow up to be the next apple or microsoft. But there are so many variables at play here, and penny-share investors have to kiss a lot of frogs before they find their prince! This kind of game is just too risky for small funds.

And the final culprits are binary bets … simple yes/no bets on market outcomes that so rarely make money for the investor that they are now facing a ban by EU regulators.

4 • look for the smooth & steady

For all the reasons we’ve looked at already, small investors are going to be tempted by the idea of a ‘big win’. If you’ve got a £500 fund, and get a £200 win – you’ve given yourself an enormous leg-up, saving months of steady plodding.

However, ‘big win’ trading methods almost always come with volatile ups and downs, as those ‘big wins’ are balanced by ‘big losses’. So, you might make 50% one month … +20% the next … then lose 40% the next …

Compare that to a steady 3% per month, and if you’re compounding, you’ll make more money, without the risk of wiping out.

(£1,000 + 50% + 20% – 40% = £1,080 compared with £1,000 + 3% + 3% + 3% = £1,092.73)

5 • what your perfect method should look like

Look for tight(ish) stops so you can use minimum stake sizes and keep risk tight. For example, if your stop distance is 30 points, and your stake is 50p, you’re risking £15 per trade, which is a manageable 3% of a £500 fund.

But don’t let stops be so tight that you’re straying into scalping. For example, if your stop distance and profit targets are both 5 points, and you’re paying 1 point in spread costs – that’s 20% of your profits already eaten up.

Avoid obscure, expensive markets, which have high spread costs and may have a higher minimum stake.

Insist on smooth(ish) profit curves (all trading methods will have some drawdowns). While past performance can’t guarantee future behaviour, it can give us a good indicator of the kinds of ups and downs we can expect. With a small fund, you can’t afford a 50% drawdown – this could force you below minimum staking levels, so look for smaller, steadier profits.

6 • how I want to help you with this

With trader’s bulletin, I’m always looking for ways to help us ‘little guys’ access the best profits. But I’m also very cautious about what I recommend, because I know how tough it can be to get together that initial investment – it’s vital to choose wisely.

Plus, that initial layout to get education, or buy a trading system – it’s galling to eat into a modest fund before you’ve even started trading.

That’s why I try to bring you the best systems, with minimum effort and outlay required by you. If you’re not already subscribed to the trader’s bulletin weekly newsletter, I recommend you add your name to the list (you can find a subscription box at the side of this page) – that way, you’ll be one of the first to hear about the best systems and the best offers.

How to day trade with less than $25,000

When you set up a brokerage account to trade stocks, you might wonder how anyone is going to know whether you're a bona fide "day trader." your broker will know, based on your trading activity.

The financial industry regulatory authority (FINRA) in the U.S. Established the "pattern day trader" rule, which states that if you make four or more day trades (opening and closing a stock position within the same day) in a five-day period and those day-trading activities are more than 6% of your total trading activity in that five-day period, you're considered a day trader and must maintain a minimum account balance of $25,000.

Background on day trading equity requirement

Back in 1974, before electronic trading, the minimum equity requirement was only $2,000. New technology changed the trading environment, and the speed of electronic trading allowed traders to get in and out of trades within the same day.

Since day traders hold no positions at the end of each day, they have no collateral in their margin account to cover risk and satisfy a margin call—a demand from a broker to increase the amount of equity in their account—during a given trading day. Brokerage firms wanted an effective cushion against margin calls, which led to the increased equity requirement.

Perhaps you don't usually day trade but happened to do four or more such trades in one week, with no day trades the next or the following week. In this scenario, your brokerage firm would still likely classify you as a day trader and hold you to the $25,000 equity requirement going forward.

You can meet the equity requirement with a combination of cash and eligible securities, but they must reside in your day trading account at your brokerage firm rather than in an outside bank or at another firm.

If you do not have $25,000 in your brokerage account prior to any day-trading activities, you will not be permitted to day trade. The money must be in your account before you do any day trades and you must maintain a minimum balance of $25,000 in your brokerage account at all times while day trading.

On the plus side, pattern day traders that meet the equity requirement receive some benefits, such as the ability to trade with additional leverage—using borrowed money to make larger bets. A stock day trader can trade with 4:1 leverage, while typical stock investors (including swing traders and those who tend to buy and hold) can trade with a maximum of 2:1 leverage.

Day trading loopholes

If you don't happen to have $25,000 to day trade, there are ways of getting around that requirement. They consist of loopholes and alternative trading strategies, most of which are admittedly less than ideal.

Make only three day trades in a five-day period. That's less than one day trade per day, which is less than the pattern day trader rule set by FINRA. However, this means you'll need to pick and choose among valid trade signals, so you won't receive the full benefit of a proven strategy.

Day trade a stock market outside the U.S. You'll have to do this with a broker that's also outside the U.S. Not all foreign stock markets have the same account minimums or day trading rules as the U.S. research other markets and see if they offer the opportunities for day trading that fit your needs. Consult both tax and legal professionals to understand the ramifications before considering this approach.

Join up with a day trader firm. The structure of each firm varies, but typically you deposit an amount of capital (much less than $25,000) and they provide you with additional capital to trade, with your deposit safeguarding them from losses you may take. Otherwise, the firm simply leverages your capital.

Do swing trading and enter trades that you hold for longer than one day. Swing traders capture trends that play out over days or weeks rather than attempt to time a one-day trend that might last for 20 minutes. While this is less a loophole and more of a change in strategy, it works for traders who want to stay actively involved but don't yet have enough equity to meet the $25,000 requirement for day trading.

Open multiple day trading accounts with different brokers. This is a less-attractive choice, but, for example, if you open two accounts, you can make six day trades in a five-day period—three trades for each broker. this isn't an optimal solution because, if you already have limited capital, each account is likely to be quite small, and day trading with such small accounts isn't likely to produce much income. With small amounts of capital in each account, you are severely limited in the stocks you can trade, and some brokers may not even accept the small deposit.

Brokers are out to protect themselves and can impose minimum capital restrictions at their discretion if they believe someone is day trading regularly (even if below the four-trade/five-day threshold) or trading in a risky manner.

Day trading on different markets

A better alternative to taking advantage of a loophole or adopting a different trading strategy is to change markets.

Forex

The forex or currencies market trades 24 hours a day during the week. Currencies trade as pairs, such as the U.S. Dollar/japanese yen (USD/JPY). With forex trading, consider starting with at least $500, but preferably more. The forex market offers leverage of perhaps 50:1 (though this varies by broker), so a $500 deposit means you can trade and earn—or lose—off of $25,000 of capital. Profits and losses can mount quickly.

Futures

The futures market is where you can trade stock index futures (the E-mini S&P 500, for example) and commodities (such as gold, oil, and copper). Futures are an inherently leveraged product, in that a small amount of capital, such as $400 or $500 in the case of the E-mini contract, gives you a position in a product that typically moves 10 or more points a day, where each point is worth $50. Profits and losses can pile up fast. It's recommended futures traders start with at least $2,500 (if trading a contract like the E-mini), but that will vary based on risk tolerance and the contract(s) traded.

Almost all day traders are better off using their capital more efficiently in the forex or futures market. These markets require far less capital to get started, and even a few thousand dollars can start producing a decent income.

Options

Day trading the options market is another alternative. Options are a derivative of an underlying asset, such as a stock, so you don't need to pay the upfront cost of the asset. Instead, you pay (or receive) a premium for participating in the price movements of the underlying. The value of the option contract you hold changes over time as the price of the underlying fluctuates. What type of options you trade will determine the capital you need, but several thousand dollars can get you started.

The bottom line

While day trading requires a large amount of equity, there are loopholes and other investment options to consider that may require you to put less of your money on the line. Before investing any money, always consider your risk tolerance and research all of your options.

The balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Day trading tips for beginners

As with starting any career, there is a lot to learn when you're a day trading beginner. Not only will you need to decide what to trade and how much capital you'll need, but you'll have to get the proper equipment and software, determine when to trade, and of course, how to manage your risk.

Here are some tips to steer you in the right direction as you start your journey.

Picking a day trading market

All markets offer profit potential. Therefore it often comes down to how much capital you need to get started. Don't try to master all markets at once. This will divide your attention, and it may take longer to make money. Pick one market so that you can focus your learning. Once you learn to make money in one market, it is easier to adapt to learn other markets. So, be patient.

You may already have a market in mind, but here's the background in a nutshell. It comes down to what you like, but also what you can afford.

The foreign exchange market, where you're trading currencies such as the euro and U.S. Dollar (EUR/USD), requires the least capital. You can get started with as little as $50, although starting with more is recommended.

Trading certain futures markets may only require $1,000 to get started. There is also a wide assortment of futures available to trade. These are often based on commodities or indexes such as crude oil, gold, or S&P 500 movements.

Day trading stocks requires at least $25,000, making this a more capital-intensive option.

A pattern day trader executes four or more "day trades" within five business days.

Equipment and software for day trading beginners

You need a few basic tools to day trade:

Computer or laptop

Having two monitors is preferable, but not required. The computer should have enough memory and a fast enough processor that when you run your trading program (discussed later) there is no lagging or crashes.

You don't need a top-of-the-line computer, but you don't want to cheap out either. Software and computers are constantly changing, so make sure your computer is keeping up with the times. A slow computer can be costly when day trading, especially if it crashes while you are in trades or its slowness causes you to get stuck in trades.

Reliable, quick internet connection

Day trading isn't recommended with a sporadic internet connection. You should be using at least a cable or ADSL-type internet connection. Speeds vary across these types of services, so strive for at least a mid-range internet package.

The slowest speed offered by your internet provider may do the job, but if you have multiple web pages and applications running, then you may notice your trading platform isn't updating as quickly as it should. If your internet goes down a lot, see if there is a more reliable provider.

A trading platform

Download several trading platforms and try them out. Since you are a beginner, you won't have a well-developed trading style yet, so just try a few that your broker offers and see which you like best.

Keep in mind you may change your trading platform more than once within your career, or you may alter how it is set up to accommodate your trading progress. Ninjatrader is a popular day trading platform for futures and forex traders. There are loads of stock trading platforms.

For forex and futures traders, one of the best ways to practice is using the ninjatrader replay feature, which lets you trade historical days as if you were trading in real time.

A broker

Your broker facilitates your trades, and in exchange charges you a commission or fee on your trades. Day traders want to focus on low-fee brokers since high commission costs can ruin the profitability of a day trading strategy.

That said, the lowest fee broker isn't always best. You want a broker that will be there to provide support if you have an issue. A few cents extra on a commission is worth it if the company can save you hundreds or thousands of dollars when you have a computer meltdown and can't get out of your trades.

Major banks, while they offer trading accounts, typically aren't the best option for day traders. Fees are typically higher at major banks, and smaller brokers will typically offer more customizable fee and commission structures to day traders.

When to day trade

As a day trader, both as a beginner and a pro, your life is centered around consistency. One way to generate consistency is to trade during the same hours each day.

While some day traders trade for a whole regular session (9:30 a.M. To 4 p.M. EST, for example, for the U.S. Stock market), most only trade for a portion of the day. Trading only two to three hours per day is quite common among day traders. Here are the hours you'll want to focus on:

For stocks, the best time for day trading is the first one to two hours after the open, and the last hour before the close. You want to get good at trading between 9:30 a.M. And 11:30 a.M. EST because this is the most volatile time of the day, offering the biggest price moves and most profit potential. Some sizable moves also occur during the last hour of the day—3 p.M. To 4 p.M. If you only want to trade for an hour or two, trade the morning session.

For day trading futures, around the open is a great time to day trade. Active futures see some trading activity around the clock, so good day trading opportunities typically start a bit earlier than in the stock market. Focus on trading between 8:30 a.M. And 11 a.M. EST. Futures markets have official closes at different times, but the last hour of trading also typically offers sizable moves to capitalize on.

The forex market trades 24 hours a day during the week. The EUR/USD is the most popular day trading pair. This currency pair typically records greater trading volumes between 1 a.M. And noon EST., when the london markets are open. And the hours of 7 a.M. To 10 a.M. EST typically produce the biggest price moves because both the london and new york markets are open.

As a day trader, you don't need to trade all day. You will probably find more consistency by only trading two to three hours a day.

Manage your day trading risk

Before you go any further, you need to know how to control risk. Day traders should control risk in two ways: trade risk and daily risk.

Trade risk

Trade risk is how much you are willing to risk on each trade. Ideally, risk 1% or less of your capital on each trade. This is accomplished by picking an entry point and then setting a stop loss, which will get you out of the trade if it starts going too much against you.

The risk is also affected by how big of a position you take, so learn how to calculate the proper position size for stocks, forex, or futures. Factoring in your position size, your entry price, and your stop loss price, no single trade should expose you to more than a 1% loss in capital.

Daily risk

Just as you don't want a single trade to cause a lot of damage to your account (hence the 1% rule), you also don't want one day to ruin your week or month. Therefore, set a daily loss limit. One possibility is to set it at 3% of your capital. If you are risking 1% or less on each trade, you would need to lose three trades or more (with no winners) to lose 3%. With a sound strategy, that shouldn't happen very often. Once you hit your daily cap, stop trading for the day.

Once you are consistently profitable, set your daily loss limit equal to your average winning day. For example, if you typically make $500 on winning days, then you are allowed to lose $500 on losing days. If you lose more than that, stop trading. The logic is that we want to keep daily losses small so that the loss can be easily recouped by a typical winning day.

Practicing strategies for day trading beginners

When you start, don't try to learn everything about trading at once. As a day trader, you only need one strategy that you implement over again and again. You don't need to know it all. Find one strategy that provides you with a method for entry, for setting a stop loss and for taking profits. Then, go to work on implementing that strategy in a demo account.

A day trader's job is to find a repeating pattern (or that repeats enough to make a profit) and then exploit it.

No matter which market you trade, use a demo account to practice your strategy. This lets you practice all day if you want, even when the market is closed. No two days are the same in the markets, so it takes practice to be able to see the trade setups and be able to execute the trades without hesitation. Practice for at least three months before trading real capital. Only when you have at least three months in a row of profitable demo performance should you switch to live trading.

From demo to live trading

Most traders notice a deterioration in performance from when they switch from demo trading to live trading. demo trading is a good practice ground for determining if a strategy is viable, but it can't mimic the actual market precisely, nor does it create the emotional turmoil many traders face when they put real money on the line.

Therefore, if you notice that your trading isn't going very well when you start to live (compared to the demo), know that this is natural.

As you become more comfortable trading real money, increase your position size up to the 1% threshold discussed above. Also, continually bring your focus back to what you have practiced and implement your strategies precisely. Focusing on precision and implementation will help dilute some of the strong emotions that may negatively affect your trading.

So, let's see, what we have: how to start trading forex: what is forex, learn forex basics, find a forex broker, start trading at how to trade with no money