Question regarding initial funding of forex account

I here that you shouldn’t underfund a forex account, but if you use a broker like Oanda, that allows you to buy or sell variable size lots, then isn’t under funding impossible?

Let me give an example.

I only risk 1% of my account/trade, and use Oanda’s fantastic order input system to regulate my lot sizes to always have the proper pip value.

So if I determine to use a system that uses stop losses of 50 pips, and risks 1%, like I am currently demoing, then there should be no problem with a $50 initial deposit should there?

Here is an example of what I am talking about.

July 25, 2007, I see on the 1 day chart that AUD/JPY candle has broken 34 day ema, and 20 day CCI is -213.64.

So, with only $50 in my account, I place an order to sell 200 AUD/JPY short, at 104.896 with SL of 104.896.

I am risking 50% on this trade, 1% of my account, and useing 2:1 leverage to set a stop loss of 49.6 pips.

Each pip is worth $.02, but since that time, I am up 328 pips, or $6.06, 13.5%, a fantastic paper profit.

So far this system is just one of 6 I am testing throughout the summer, but if It proves profitable I will continue testing for several more months, and when I start real trading I want to start off small, preffering to double my initial investment of $50 before I add any more.

Given the proper money management technique, and the fact that I can alter my lot sizes to always risk 1% and only 1%, wouldn’t $50 be sufficient for an Oanda account?

Isn’t the problem with other brokers that you have to trade fixed integers of micro lots, which are 5,000 each, meaning that each pip is worth $.50, and so a SL of 25 pips means a $12.50 loss and so an account of no less than $1250, assuming no draw down at first.

But if you can alter your lot sizes to the single unit, such as from 200 AUD/JPY to 187, then what’s the harm in a teeny account?

Wouldn’t such a small account be good for beginners?

I here that no matter how long you demo trade, your first real money trades are very tense, so why not risk a ridiculously small sum?

That way if you lose 3 trades in a row, you can tell yourself, “Hell, I’m only down $1.50, couldn’t get a cup of coffee for that.”

And imagine how rewarding it will feel to turn a teeny account of $50 to a slightly smaller account of $100 or so.

By that time one would feel completely at ease with one’s system, a kind of zen that would make one confident enough to go crazy and add $100 to one’s account, and afteryour $200 doubles to $400, add another $400 and keep this up until you are trading tens of thousands of dollars and making crazy money.

Am I wrong, is $50 too damned low? even for Oanda and proper money management techniches?

All replies are greatly appreciated.

it’s possible. real trade psychology is completely different from demo accounts. use your $50 to learn this psychology. but, don’t expect to be rich from this account :stuck_out_tongue: only use it for beginning.

Well put Luxar, but consider this:

There are about 250 trading days in a year.

Now assuming that you pay taxes on Forex profits as income, and assuming 50% tax rate, (to be ultra conservative) in order to earn 100% you need to triple your money.

To triple your money in 250 trading days requires .44% daily, which is 2.2% weekly and 9.2% monthly.

I have heard that some people earth 10% per month so they fall into this scenario.

Now, you if you double your money each year, then after 10 years you will have increased your account by 1024 times.

so $50 becomes over $50,000.

Each decade you multiply your account by that same amount, so after 20 years you have $50 million, after 30 years $50 billion.

Now obviously once you get past the first 15 or so years a single broker won’t be able to handle the size trades you are making, and even a large, liquid market like Forex may not allow the speed and fluidity your system requires.

But at the same time I’m sure tax rates for Forex profits aren’t close to 50% and I’m also sure that once I double my $50 I will add another $100 to it and so on and so on.

In this way I will, within 2-3 years hopefully, be up to an account worth $10,000+, in which 7 years of good trading makes you a millionaire.

And if I succeed in becoming a doctor, and can afford to set asside $25-30,000 each year, all of which goes into Forex, then by age 40 I will easily be worth tens of millions of dollars.

By 50, a conservative estimate is $100 million, even if I need to get multiple accounts with the big boys like Schwab or Merryl Lynch and pay some professional to make the trades occur that I need.

So you see Luxar, even a pittance can make a fortune within 30 years, even if a fortune means only $1 million, which I would remind everyone, would meen $250,000 in annual income, assuming you made 25% after tax annual returns.

Assuming 50% tax rate again that means 50% gross returns needed, or 3.3% monthly, which any decent system should be able to pull off.

And If you have a larger account of say $2-3 million then 15% after tax profits will suffice, numbers so low it seems almost guranteed as long as you have a decent system, and religious money management.