Trading capital-how much do you really need for your live account?
Ok, I think it is about time I address this question about trading capital. Most people are not going to like this, but I have to say it anyway, someone has to say it, and the truth shall set you free. Your earning potential depends on your start up capital. Every trader dreams of turning his/her account into a million dollar account. It is definitely not impossible, it is doable but not everyone can do it ( I am so sorry to burst your bubble). Forex trading is good money, but it is also exaggerated a lot by most traders who are vocal about it. Most are either selling dreams or their flashy lifestyle, and aspiring traders are buying into that. Millionaire traders are out there selling their lifestyle to you and they forget to mention to you that you are not going to make a million out of $500. They also forget to tell you that what they are showing you cannot be achieved by a start-up cash of $500, your trading capital does play a huge role in determining your returns. Forex market is flooded by new traders with unrealistic dreams and goals on a daily basis, these unrealistic goals are as a result of what is being sold to them through the seminars and social media.
The brokers can tell you that you can start with as a little as $30, but realistically speaking, it is impossible to make money with that amount. Then there are brokers which have a minimum deposit of R5000, when I started trading a few years ago, the rand was trading at R10 to the US Dollar, which then meant that R5000 was actually $500. Things have changed a lot since then, the rand is now trading at +-R16 which means R5000 is no longer $500 but +-$300. Now again because I am a realist, $300 is too little to trade with, you cannot trade much with it, yes you can start there, but I always advise my team to work on topping it up (if they can). This is to create a better trading environment, as well as trading commodities and other financial instruments within the Fx markets. Your goals are a deciding factor, it all depends on what you are trying to achieve with your trading account. 0.01 volume is recommended for a $300 account, but if you want to take some money home month end, you cannot expect that from $300 right away. A trader who doesn’t gamble can compound his/her profits and gradually increase the lot size, but it does not always happen that way, it is something that is easily achievable on paper. It takes a lot of patience to trade such account and the quantity traded is too small. You have two choices if you want to start with a small account or if you already have a small account, you can either top it up/invest more or stick to the recommended size, which is 0.01 and exercise patience and lots of it.
Common issues associated with trading an account with small trading capital
I believe the most important part of trading is to get it right more than anything. Learning how to protect your equity, learning to accept when you are wrong, learning to let go of bad trades, being disciplined and having a trading plan with good money management skills to accompany all that (that is what I preach to those under my mentor ship), setting monthly targets, breaking it down to weekly and all the way down to daily. The consistency come as a result of practicing all the above mentioned ( it doesn’t happen over night). The amount of money that you start with, does not make any difference if you do not pay attention to the above mentioned. If you are a profits only trader, rather start with that $30 and lose it all. There are certain challenges that are associated with trading small account.
A trader who is trading an account of about $1000 and above, is likely to relax and trade without feeling pressure, but a trader who is trading with below $500 equity is likely to stress too much and end up taking large positions in order to grow the account faster, even when the market conditions aren’t really favorable, this trader just wants to trade. Even though profits can be accumulated and be compounded, this trader becomes too emotionally attached to the account. So how about we agree that when trading small account , you should not expect to take some money home at least for some few months, just so your account can grow and you can also increase your lot size (quantity traded) to create a better trading environment and to make more money . Am I saying you should start with large sum of money? No, not at all, if you can manage a $500 account, you can do the same thing with a bigger account, but consider the facts above, if you do start small, start with a minimum and top it up later just like with any other business, you are likely to use your money to grow it at the beginning. You can also just save up towards your trading account on a monthly basis, say maybe set aside R1000 and top up your account month after month, it works wonders for serious traders who are willing to grow their accounts. Everything depends on you, it all depends on what do you want to achieve with your trading account, but it all begins with being a realist. A trader who is unrealistic will always face disappointments and be at risk of over trading and end up getting a margin call. Thank you again for stopping by, sharing is caring, if you find this post informative, please do share with your peers, for further assistance, leave your comment or send an email to: firstname.lastname@example.org