FX Trading Capital - How Much Do You Need To Be Profitable In FX Trading
by Chris on February 15, 2010
Novices searching for a foreign exchange trading tutorial are always very keen to get out there and start making profits but lacking the right attitude to your start up funds this in many cases does not work out well. You could think that you want to get started so you start out with a small capital and you are not shocked if you lose in the beginning, but at the back of everybody's mind is the expectation of making huge profits and it can be very discouraging when things go wrong. In fact, most newbie traders give up almost before they started, simply because they got started without the right preparation or sufficient back up trading fund. So how much money do you actually must have to get involved with forex trading?
Certainly it is true that you can open a live trading account nowadays with just a hundred dollars or even less, but for most people that is not a great idea. You cannot start out with such a tiny startup capital and expect to be making a living from foreign exchange trading any time soon.
Another problem with starting foreign exchange trading with a too small margin equity is that you will be tempted to overtrade. You could start to treat it as a game. You will want something to happen and you do not have much to lose so you can initiate a trade that does not fit with your system just as an experiment. Sometimes it will win, frequently it will lose. Generally on balance you will lose money that way, but that is not really what matters. The real problem with this is that unless you maintain very precise records (which is hard to do when you are only risking cents on every trade) you will end up not knowing if your original forex trading strategy would have been making money or not, as you didn't keep to it.
As for how much money you need, it's quite likely more than you think. Brokers will let you open a mini account with $1,000 but if that is everything you have to trade with, then a micro account is more recommended. You should be trading micro lots otherwise your risk will be too high and you may lose it all.
Multiplying that up, it would be advisable to wait until you have $10,000 to open a mini account. And joining the big boys with a standard account requires around $100,000 if you wish to give yourself a fair chance of success.
It sounds like a lot of money but there is no need to let this stop you trading. Just bear in mind to think small and get started with micro accounts if your funds are not big enough. It is also recommended to use forex trading signals, in order to improve your risk profile. But even the best forex signals will not guarantee profits if the margin equity is insufficient.
FX Trading Capital - How Much Do You Need To Be Profitable In FX Trading
Another problem with starting forex trading with a very small account balance is that you will be tempted to overtrade. You may begin to treat it as a game.
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