If you are new to Forex and Fixed Time Trading then chances are you have wondered how much you need to start trading.
Should you start with the minimum amount brokers allow as a minimum deposit? Or is more better?
Though your broker allows you to deposit as low as $10, it is never enough to start trading.
How about $100, is it enough to start trading?
It may sound so much for some while still so little for others.
But, again, our BIG question is, is $100 enough to start trading?
Well, allow me to deviate from the question a little bit, and ask you a more relevant one.
What factors determine how much you need to start trading?
I think that is a better position to start with, don’t you?
Here are factors which inform how much you need to start trading:
Minimum Deposit Amount by Your Broker.
If $100 is enough to start trading will obviously be determined by your broker.
How much does your broker allow you to deposit?
If your broker allows deposits less than $500, then, is $100 enough to start trading with such a broker?
We all know it is not.
Different brokers have different minimum deposit amount restrictions.
There are those whose minimum deposit amount is $200, others $500, and others even less.
If your broker allows you to deposit as low as $100, then it is enough to start trading with the broker. That is as far as this factor is concerned.
How Much Disposable Income You Have.
Disposable income means that after spending a certain amount on something, you can still continue living your normal life.
Normal life means that you can still pay your bills and put food on the table.
So about this factor, is $100 an amount you can afford to spend and even lose in trading and still not be affected?
If so, then it may be enough as an initial investment in Forex.
However, if that is not the case, and spending $100 on trading or even losing it will affect you adversely, then no. $100 is too huge an amount to start trading with.
Any amount you invest in trading should be an amount you can afford to lose.
That is why I advise that you should not be in debt or struggling financially before you resort to trading.
You will get the shock of your life when everything takes a turn for the worse because trading is risky and can lose you money in seconds.
If your disposable income is more though, you can do better by starting trading with even $1,000.
The higher the starting capital, the less the pressure.
Emotions while Trading.
Emotions are human and as long as you are not a machine, they will affect you.
The only way out is to tame them, but given that we are talking about a beginner here, emotions must play part in the equation.
So let’s say you start trading with that $100.
You spot a suitable signal and are convinced that it is a good trade setup. You set up your deal so perfect with your Stop Loss and Take Profit in place.
A week later when your Take Profit is hit and you realize that you made 10% of your account.
You are so excited until you realize that it is equivalent to only $10.
If you ask me, 10% in a week is way too huge, but as for you, quick money is what you want as a beginner, right?
Greed takes the better part of you and you start engaging in risky behavior of risking more than 5% of your account in one trade.
The next day you are exposing up to 50% of your account and in not more than 5 deals, you have already blown up your account.
$100 is only enough to start trading if you know what to do with your emotions while trading. Otherwise, you can only survive with a bigger amount.
Trading Strategy You Intend to Use.
Trading Strategies vary from trader to trader.
One trader uses a certain trading strategy whose money management requires a certain amount of starting capital.
The other uses another whose money management is only possible if a smaller or larger starting capital is available.
We know that in Forex, you are not supposed to risk more than 5% of your trading account, but the case may be different in Fixed Time Trading.
There are Fixed Time traders who have formulated robust trading strategies.
In such strategies, when a signal comes up, only a specific maximum number of candlesticks can defy, after which that last trade often wins.
In that case, you only need to know how many candlesticks can defy and so how many maximum trades you can lose before a win.
Are you using the martingale money management system which involves doubling trade size after a loss?
Then you can calculate how much you need in your trading account to cover for the maximum trades lost before a win.
$100 is only enough if that system of yours requires only a maximum of $100 before you win.
If the system requires more, then what else can I say?
It’s not enough.
How Much Returns You Anticipate.
Let’s say you want to be risking only 2% of your account in every trade.
2% of a $100 account is $2 while 2% of a $1,000 account is $20.
Let us also assume that you are trading Fixed Time and the asset you are trading gives you an 80% return every time you win.
So if you trade with the $2, you earn $1.60 while if you trade with $20, you earn $16.
You know where I am headed, right?
The returns you want per trade, when coupled with your risk appetite per trade, should inform how much you need to start trading.
It also applies to Forex.
Here, your risk to reward ratio dictates that the more you risk, the more you should target.
That is the same idea we just discussed.
If $100 achieves the desired returns, then it’s enough for you to start trading with. If it doesn’t, deposit more.
I’ll post the same question back to you.
From what you have learned on this post, is $100 enough to start trading?
Go on and leave your thoughts in the comment section.