Decent initial investment?

Beginner Questions
1

I started out on my 50K practice account and thus far have made a few thousand dollars. Is the practice account just like a real account in every way? If so I really think I could do this and do it well. However I am taking the time to learn everything I can about Forex and I must say that this site has a really good beginners ‘school’. I also intend to practice for at least a month until I am sure I have the hang of things.

My main question for this thread is how much money would I need to invest? I have 50K literally sitting in my bank collecting nothing and it is high time I invested it. However I am not sure where at all to start or if 50K is enough to even consider getting into this game.

Advice is greatly welcomed and appreciated.

Thank you for sharing your expertise in advance.

:51:

2

–whether the practice and real accounts are exactly the same depends on the broker
–you can get 50:1 leverage, so start small–invest maybe $1-2K and if you keep winning you can put more in your account

3

That sounds like a good plan to me. Maybe practice for a month or two and then start out with a 1-5K account and then add more monthly and build up over time.

4

that’s what I’m doing. I’m probably going to put in $2K initially, but still refining strategies that work. Just remember, don’t lose your ass, like 75% of people lose at currency trading.

5

Do you have any info on the average rate of return made by traders? I would be interested to know what percent traders who succeed actually make.

6

My advise would be to approach this with great caution! I’m glad to hear you’ve had some initial success but ‘a few swallows does not a summer make’. I’d demo trade for three months and learn all you can… BP school would be a good start. If after three months your demo account is at break even or better you might want to risk a small amount for real? To be realistic and I’m sure other experienced traders here will agree… I’d give yourself at least a year before considering that you might be good at this. The very best of luck in any event. :8:

7

Not that Carter needs me to agree with him. However, do a demo but set it up like you would your first live account. NOT 50k. Something realistic, like 250 bucks. Turn that into 1k or lose it, but at least you’ll know that there is nothing easy about this. Funny money demo accounts sure are fun when you have nothing to lose. Heh, when I started out, yep, i thought I was a natural. I would take a trade with 3, 4, 5 standard lot sizes and sure I would get lucky and make 4-6k a trade. Dang I was good! Then I went live… :frowning: whoops

Before you do anything with real money, Baby pips school and demo account the whole way through it. Then do it again. Then start up a very very small account to go live with and see if you can transfer what you learned while running a demo account into a live account.

8

Something else to consider, do you know what type of broker you are going to want to work with? ECN, ECN/Hybrid STP, STP, STP Hybrid DD. These are important questions to have answers to depending on your style of trading.

edit I have a STP/DD hybrid cause that was all I could afford to get into. I will be going to an ECN asap.

9

I don’t have any info on actual rate of return…a better indicator would probably be trader suicide rate.

10

Hi, Kate

Point #1. Currency trading is not an investment. It’s speculating, which is very similar to gambling, and not at all similar to investing.

Point #2. $50K is much MORE than enough to “get into this game”. You are very likely to lose all, or most, of your first live forex trading account. Therefore, start small.

Point #3. There is a very long, very steep, learning curve ahead of you. Plan on giving yourself more than a month to practice with “play money”, before you open a live trading account. After you open that live trading account, plan on giving yourself at least a year to become consistently profitable.

I’m not passing judgment on your ability to learn — I’m simply telling you that I have seen novice traders come and go, all of them with high expectations for making their fortunes here, and all of them found that [B]trading is easy, but being consistently profitable is hard.[/B]

Point #4. Master the Babypips School. Notice that I didn’t say “read through it”, or “study it”. Make it part of your brain. Practice what the School is teaching you in your demo account.

Find your style: scalper, day-trader, swing trader, or position trader. Develop a strategy which earns you consistent paper profits. Then open a tiny live account, and see whether you can transfer your paper-trading success to the real world of real money. You’ll be shocked at the emotional demons which suddenly jump up in front of you, when real money is on the line — even tiny amounts of real money.

How small is a “tiny live trading account”? It could be as small as $100, or even less. As you may know, there are brokers who will open a live trading account for you with as little as $1. A whole thread could be devoted to discussing how much a novice trader should start with; and 10 different traders would probably offer you 10 different opinions on that question. Since you asked, I would say, in your case, $1,000 tops, to start — [B]after[/B] you have done all the preliminaries mentioned above.

Don’t be in a hurry to place your $50K at risk in this business. I doubt that you would study horse-racing and parimutuel betting for ONE MONTH, and then take your $50K to the race-track. The risk of loss in currency trading is as great as the risk of loss in horse-racing.

11

If I were you I would start with $500 and then add $2000 every Quarter that you produce consistent profits. So let’s say after 3 months your account is sitting at $575, then you add $2000. If it’s anything less than $500 then you have to do the 3 months again. Just add your money in stepwise, constantly “rewarding” consistency, and by the time you’ve added all that $50,000 (which is an amount worth taking care of IMO) I’m sure you will be very happy with where you are in terms of account size and confidence in your consistency.

12

Just to add to this. Leaving that kind of money in a forex brokers coffers would be silly anyway. I seriously doubt many of these guys that trade at the larger levels would even have more than 10k in a forex brokers hands. Thats just me, but anymore than 5k-10k in a forex account is dangerous. Sure, they have funds available from various bank accounts to add more funds if needed, but they don’t keep that kind of money in any single account.

13

Why would it be dangerous to give your forex broker that kind of money? Certainly I have alot to learn. Bestow your wisdom upon me. :slight_smile:

14

I’ve just read some of the disclaimers with brokers out there that if they get into financial trouble they’ll take your funds if they have to. They can just fold up shop and poof your money is gone. Another reason is, why use a broker account to hold money for you when you aren’t going to need it all in there other than to replenish should you lose a ton of trades. I just figure, if and when I ever get an account to say 5k… anything above and beyond that, I’m going to pull out and stick in the bank and at least draw a little interest on it. I seriously doubt I’ll ever have a single position that would require me to have anymore than that in it.

Then again, when I do get to 5k, heh, I won’t be trading forex anymore. I will be moving on to the futures, such as the S&P emini

15

Its a serious point. FXCM (one of the bigger brokers) have recently sent me an email stating larger accounts i.e. over $10K, will no longer be held in a seperate ‘client’ account but in their own. A client account can’t be legally touched, their own obviously can.

To most I would guess this will not prove problematic. But to the few that either deposit large trading sums or compound up their account it would be worth going over the fine print of an intended broker.

16

because anything can happen…

17

FWIW, I started out in FX a few months ago messing with a demo account and like someone else said, damn I was good. Then I started a micro account and put $300 in it and started trading live. First day I caught a big gap up on the USD/JPY bank intervention and netted $65 in about 2 minutes on one trade, thats a lot in a micro account. Now I was plenty overconfident and really didnt know what I was doing but i was sure I was a natural.

Fast forward a couple weeks and I had drawn my account down to under $100. I was just taking trades on the fly, no real plan or strategy and you can see how well that worked. Finally I got a solid strategy and a plan together and wrote it all down. I started following the plan, for the most part…occasionally I just go a little rogue and end up losing money. Luckily I’m getting pretty good at gaining it all back after I lose it.

I added $60 to my account when it was below $100 and that brought me back up to $150, I’ve started keeping track of all my trades and set some goals. I’ve been doing really well ever since and making consistent profits, I would say i win 7 of 10 trades and while some dont reach my tp they are still positive gains rather than losses.

Start small, I would say just start a micro account with about $500, If you can make consistent gains with $500 you’ll make consistent gains with $5000…pips are pips but no sense in burning up large sums of cash while you develop your style and learn to win more than lose.

practice account has one major flaw, you dont have the same emotions when you arent trading real money. Even if I had stayed on the demo for months I still wouldnt have learned what I know now because account drawdown can get really painful and you dont get that same gut wrenching feeling when trading a demo.

18

Pips are pips, but the bigger the account, the more psychological pressure there is. Logically there isn’t any difference, but we all have unique perceptions for what “a lot of money” actually amounts to. You might be able to trade 500 fine because you know you can refund it with one paycheck at work, but at 5000 you don’t have that option anymore. Then you get to 50,000 and you’re starting to lose your whole paycheck on single losses. Although if you really master dissociating Dollar Gains from their pip equivalents and purely focus on % increases, you can largely mitigate these psychological pressures…

19

The right amount is the amount you can lose without pulling from any necessary asset you need. Like Clint said, this ain’t investing. If you aren’t willing to take $50,000 to a casino, then you shouldn’t put it into Forex. By this analogy, I’m only stressing the emotional and financial value you have towards the amount you start with.

20

@ Kate: If you really want to invest 50k one day, take a look at CitiFX:

CitiFX Pro | Forex Trading with Citi® | 130+ Currency Pairs with FX Spreads from 1.2 pips

They have some advantages, but I think the minimum deposit is 10.000 $, so if you want start with a smaller amount, you’ll have to choose an other broker first.