Itâs difficult to give an answer that accurately covers [I]all[/I] people and [I]all[/I] circumstances, but hereâs a ârule of thumbâ answer: donât think about trading with real money until youâre accurately collated the results of a minimum of 300 consecutive trades [B][U]and[/U][/B] results over a period of a minimum of 6 months (whichever criterion is the [U]longer[/U]) and proved that you didnât make a net loss over the period.
Eew, I know how inconvenient that is!
Yes, this is perfectly true.
Generally, undercapitalisation is a problem because of the way people behave with it, regarding their position-sizing.
If you look at it completely logically and sensibly, of course, and do everything âpro rataâ regarding position sizes, it neednât be. But in reality, that very often isnât what happens: people get frustrated by dealing with such tiny amounts of money and think to themselves âIâm never going to make anything work talking about with these position sizesâ and of course thatâs when the âaccidentsâ happen.
What theyâre failing to appreciate, of course, is that the purpose of trading with a $200/$300 account isnât to try to make a living from it, but to gain experience, screen-time and real-money practice with it, until they eventually have enough capital to trade meaningfully.
In my opinion, those are brokers to stay [B][U]WELL[/U][/B] away from, for reasons that arenât immediately apparent.
Genuine, ethical brokers donât use promotions like that, and there are reasons for that. Reading the small-print of the exact terms of those âdeposit bonusesâ will clarify how many trades youâd need to do before ever being allowed to withdraw any of the profits.
âBrokersâ who make offers like this (and there are a lot of them), without exception, arenât genuine brokers: theyâre all counterparty market-makers whose business model revolves around attracting a particular type of customer, whose lack of experience they know will make such offers appear attractive to them, because they understand very clearly that theyâll almost never actually pay out at all, on such offers, because (a) their system is more or less rigged, overall, to make it close-to-impossible for the customers to win in the long run, [B]because thatâs how they make their living[/B], and (b) thatâs the potential customer-group their research has correctly identified as the one least likely to be able to trade profitably over the medium-term anyway - in other words, the odds are stacked [B]hugely[/B] in the âbrokerageâsâ favour. :58:
These are âbrokersâ who donât offer negative balance protection, and theyâre âregulatedâ (if you can call it that) in a variety of âoffshoreâ places, such as Cyprus, where theyâve [U]deliberately chosen[/U] to be regulated for reasons that suit themselves very nicely but - to put it mildly - are far from in their customersâ interests - in other words, theyâre âbrokersâ one shouldnât trade with. :23:
This is one of the [I]biggest red flags[/I] you can have, warning you [B][U]not[/U][/B] to do business with a âbrokerâ - not because of the bonuses themselves but because the fact that a no-deposit is offered [B][U]tells you something very important about the brokers own business model, the type of traders theyâre trying to attract, and why[/U][/B].
In other words, theyâre not reasons that are apparent to the inexperienced, and âthe inexperiencedâ are exactly the ones theyâre trying to attract ⌠and the fact that theyâre promoting âno-deposit bonusesâ tells you that, loud and clear - if you understand how to hear it.