menu-caret
As seen on:
ntv-logo sky-logo comedy-central-logo

How much money do I need to trade forex?

How much money do I need to trade forex?
Asked by
Benjamin Schmitz categorie-icon time-icon2 months ago
1 Answer Answer Question

Justin Freeman
Answered time-icon2 months ago

The major broker platforms make it possible to open accounts with relatively small amounts of capital.

Plus 500 have a minimum of €100 for debit/credit card transfers. (https://www.plus500.co.uk/FAQ)

AVATrade have a minimum deposit requirement of $100/£100/€100

(https://support.avatrade.com/hc/en-us/articles/360001783891-How-do-I-open-an-account-with-AvaTrade-).

Pepperstone apply a minimum initial transfer of £100 (https://pepperstone.com/uk/).

New traders and even experienced traders looking to trade/test a new strategy would do well to take on the generally accepted advice that starting trading ata small size is a good idea. At the outset the aim should be to focus on making consistent percentage returns rather than substantial returns in terms of cash amounts. The simple risk-return ratio can’t be avoided. If you’re making big absolute returns off small capital stakes then you can also lose big as well.

You’ll note that the brokers suggest opening with sums greater than the minimum. AVATrade for example suggesting a starting balance between £/$/€ 1,000 – 2,000. https://support.avatrade.com/hc/en-us/articles/360001761072-How-much-money-do-I-need-to-deposit-to-open-an-account-

It’s worth taking on board advice in this area and understanding the reasons that the amount of capital you are trading matters. It can also help develop your understanding of trading in general.

Given that no trading strategies have a 100% win rate you’ll need to have sufficient capital to finance the program you are running during those times that it posts losing trades. Say for example you start with $100 and post unsuccessful trades and suffer a 10% draw. Now with only $90 as your balance it might be the case that you don’t have sufficient margin to put on the next set of trades – these being the exact ones that are going to post profits and get you back above break even. Some strategies involve ‘scaling up’ where position sizes are increased – this too will put pressure on your capital.

It does bring us back to the point of starting trading in small amounts but do make sure you have enough capital to see things through. This is a particularly important consideration when engaging in Copy Trading as you’ll be following another trader’s decisions and might not know quite what position sizes are due to be put on.

Focusing on percentage returns is the name of the game. This can even be tested in Demo accounts where brokers provide about $10,000 of imaginary capital for traders to trade hypothetically.

Login or Register to answer this question

question-icon 1 view-icon 89