The amount of money you need to start Forex trading depends on a number of factors ranging from the type of trader you want to be to the amount of experience/expertise you have gained. For instance, an aspiring full-time trader will definitely require more money to start trading compared to an aspiring part-time Forex trader. Let’s get into more details about this factor and many more.
What type of Forex trader do you want to become? How much do you want to earn?
The amount of initial capital you need is a very important subject given the fact that it determines the amount of money you are capable of making. For instance, an initial deposit of $100 won’t be ideal if you are looking to earn a significant amount of money or you want to become a full-time trader. This can be attributed to the fact that it will take you a considerably longer period of time to make substantial gains with a small deposit. Although the risk may be significantly lower because small deposits allow micro and mini lot trades only, you need to be very patient otherwise you’ll need to trade with more capital i.e. at least $3,000 to stand a chance of earning a living as a Forex trader.
Also, if you are planning to become a swing trader i.e. a trader who holds positions for a considerable amount of time (days, weeks or months), you will need a considerable amount of money to hold trades that long. A trading account with at least $5,000 will be ideal for you to start of as a swing trader. You must however select the right type of account i.e. a mini account where 1 pip equals to $1 to make sure you can hold positions for as long as possible without risking a significant amount of money.
What is your risk appetite?
The amount of money you need to get started should also be dictated by your risk appetite. How much money are you willing to risk per trade? Ideally, you should risk 1% of your trading capital on a single trade. This simply means you should risk $10 only per trade if you wish to start trading with $1,000. It’s however up to a trader to choose the amount of money they are willing to risk per trade. In a nutshell, you need to start trading with a significant amount of money i.e. $10,000 if you have a high risk appetite since you don’t mind risking money.
How much money do you have?
The amount of money you need to get started as a Forex trader should also be dictated by the money you actually have or can risk. Since Forex trading is very risky, it’s advisable to start trading with your own money as opposed to borrowing money to trade. If you can afford $1000, start with $1,000 or less. It might take you more time to make a significant amount of money however, you are better off losing your own money as opposed to losing someone else’s money in the initial stages as a beginner.
What’s your experience level?
If you are starting out live trading having traded with a demo account for at least a year and gotten a strategy that works, you can trade with as much money as you wish otherwise, you need to start small if you don’t have much experience.
In a nutshell, the amount of money you need to start Forex trading depends on many factors from the type of trader you want to become and the money you have to factors like your risk appetite and experience level among other factors. Ideally, you are supposed to start trading small and then increase your capital with time as you gain more experience and test your strategies on a live account. This should be after you have traded with a demo account for at least 6 months. It is however important to note that finding a wining trading strategy is more important than the size of your account initially and in the future.