Hi, I’m pretty new to FX, so maybe this is a dumb question.
I see a lot of people recommend that you only start live trading if you have a sizable amount of capital. My (perhaps naive) understanding of this recommendation is that many brokers will only allow you to buy preset amounts of currency. These amounts might be too large and would risk too much of your account in one go; is this right or wrong?
If the above is true, then is it still bad to trade with a broker that allows any-size lots (e.g. Oanda) with a smaller amount of capital? It’s obvious to me that you have more potential for profit if you are trading bigger positions, which a larger amount of money would allow you to do safely, but otherwise I’m unsure why it matters since there’s no commission, only spread (which scales with your position size).
In a similar position. For me I think that $1000-2000 (US) is what I’m willing to ‘lose’ so is probably going to be my starting position.
Obviously I aim not to lose the money but I think during the initial stages you have to be prepared to lose a little and therefore may need some capital.
Since I am in HK there are plenty of services available for smaller traders even through online banking so the access for smaller traders is not an issue.
For a micro account I would suggest minimum $500 and really $1000 as a starting point and then keeping your positions opened to a minimum at the 0.01 lot sizes. It will take a lot longer to lose your money if you are no good at this and it will also give you ample time to find your feet and see if you are cut out for trading.
Whether you trade $1 or $100,000 dollars, the path you have to follow and learn is: a trading method that will deliver you more positive results than negative in the long term. A money management plan that will protect WHATEVER capital you start with as well as grow your account balance and work your trading method with patience and discipline. Traders may differ in their approach to the above and all thinks their approach is the best (including me), but no successful trader disagrees with the 3 things you must do.
So your account balance is only one part of the overall plan. A proper trading method should give you more positives than negatives long term; in my opinion don’t go live until you have one. Your money management plan has to protect your balance and grow, no matter what you start with. Don’t deposit that until you’re sure you have one that addresses both parts. In my opinion the smaller your balance; the more accurate your trading method and money management plan have to be. As well the smaller your starting balance, the more disciplined and patience you have to have. Good Luck
Gp
No it’s not bad, as a matter of fact, it’s a very valid process for slowly getting your feet wet in this crazy FX trading biz. With an any-size lot Oanda type of account you can trade as small as a penny per pip.
As your confidence and comfort builds, deposit more $$$ and trade larger.
+1. One of the things I tell new traders is that if you can’t manage a $100 account properly there is no reason to believe that you can manage $100,000.
Since you are beginner it doesn’t matter how much capital you have, you should start trading with very small amount till you unsure yourself that you have the right trading strategy and you can trade profitable on consistent level. Than you can start increasing your trading capital.
As others have stated with much clearance I would just like to add some of mine observations about the amount of capital for trading…
For micro lots ( 1 pip = 0.1$) I would suggest a minimum of 200$ starting capital
For mini lots ( 1 pip = 1$) a minimum in my book would be 2 000$
For normal lot ( 1 pip = 10$) a minimum would be a 10 000$ account with 20 000 as recommended size
For total beginners I would recommend to never have opened more than 0.01 lot or 0.1 lot or 1 lot depending on the account size at any time. Which would mean that on 200$ account it would be wise only to have one 0.01 lot position opened at any time (no more, no less )
Btw. on demo account try to use more leverage than needed to see what kind of effect it has on your equity/margin etc. Because those are the parameters that you should be observing the any time. also when opening a position you should know how much of your margin will it consume so that you can do some calculations before. For example opening 1 lot of EURUSD would consume depending on account leverage 1000$ of margin (on 1:100 leveraged account), or 500$ (on 1:200 leveraged account), or 333.33$ (on 1:300 leveraged acc.), etc.
Initial capital as $1 is used in micro accounts. It is just for facing real market getting practice of you own amount management .This amount is not sufficient for profit taking .When you are good in micro accounts had enough practice then invest some good amount to get real profit from investment.
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