There seems to be a lot of conflicting advice on the matter of starting account size. I’ve heard and also read on BabyPips that opening an account with around $250 is a bad idea and I completely understand why as a lot of leverage would be needed to see any significant gain and a large capital is needed as a holdfast against normal market oscillation. However, there seems to be an equal amount of advice out there that paints the picture that demo trading for extended periods of time is misleading and one should open up a small account to gain the benefit of live trading. What then is the best idea for a beginning trader: Opening the small account for the experience or demo trading until a large enough capital is acquired? As it stands I am a university student whose money is all but set aside for student loans, line of credit and tuition and thus has a significant lack of capital.
I would definitely suggest starting with a small account size. I’d start with 250 but I also wouldn’t use large lot sizes if I chose to go that route. Open an Oanda account and you can set any lot size. With this, you can easily trade with real money and see the differences that emotion brings while also not losing your account in one bad trade.
I agree with virtecs, Oanda is the way to go if you have a small amount of money to start with. They use units instead of lots, with 1 unit being worth 1/100 of a penny per pip, so you could literally open an account with $1 and trade fractions of a penny if you wanted to.
I wouldn’t go to that extreme, of course. It wouldn’t be any better than demoing, just trying to show that small accounts are fine as long as they are with the right broker. When I moved from demo to live I started with a $50 account with Oanda and it worked great for me. Once I got used to everything I then added more money as I could afford it…
haha whatever you do dont gamble your tuition money away
if you have practiced on a demo account enough to be confident, and want to go to live trading then do.
the reccomended capital by babypips is because of percentage. alot of people will tell you dont risk more than 2% in a trade, im fine with risking up to 10%, but thats just me. make sure your broker allows you to trade micro lots if you’re going to open an account with 250-1000 bucks. then, calculate how many lots can you open without risking yourself to margin calls. (this is why leverage is bad, but once you understand it its fine.)
[U]As a retired school teacher, let me give you some really sound advice.[/U]
Finish your university studies first!!
That is more than enough to keep you occupied.
When you have graduated and ready to face the world, that is the time to look at forex or other things.
But I think you will make much more money in the job that you will be doing after uni.
Forex is nothing more than a distraction from your studies right now, and to be a successful trader requires many years of experience.
A knowledge base is required just like your studies now.
[B]If you follow this forex distraction right now, you will end up being successful at neither your uni work nor forex.
You know what my friend, that’s probably the best advice I’ve gotten about this yet. I had been thinking that same thing a lot recently and I’m glad that you confirmed it. I tend to get ahead of myself when it comes to plans about the future.
I have all the threads posted here, i have also done the same thing. First i opened a demo account and understood the trading strategies and to manage make portfolio to manage my investment.
Demo demo demo. Learn while in school but dont trade live. keep demo trading when you get confident you can make a profit you can start trading live and pay off those student loans. but dont open a live account right now
The absolute unvarnished truth that one must understand is that, EVEN WITH PROPER MONEY MANAGEMENT, starting at 250 provides you fewer safety paths than a larger number ---- the old saw “the rich get richer” holds sway because when starting with a larger number of “money units” its easier to make them go up then down.
Donald Trump is one example — who would he be if his father had not left him millions ? Could he have started a NY based real estate fortune on a few thousand borrowed dollars ?
You CAN, with slowness and simpleness and EXCELLENT money management techniques, increase your equity hundreds of percentages, BUT (and especially in todays market) one has to be VERY VERY careful and right an awful lot. I’ve demostrated a number of times how starting with $250 can create a very nice account in time, but I’ve sweated and cursed, thrown things and people and generally been not a very nice person, and i have years of trading experience in Forex — imagine one WITHOUT that experience.
Do as you wish, but many a brokerage out there is making out quite well by closing 250 accounts left and right !
Can it be done ? ---- YES !
Can you do it ? — DOUBTFUL !
The absolute unvarnished truth that one must understand is that, EVEN WITH PROPER MONEY MANAGEMENT, starting at 250 provides you fewer safety paths than a larger number
I couldn’t disagree more! If you are using proper money management and trading a set percentage of your account then a smaller account is no different than a larger account. For example, if you risk 2% on each trade you would need to have 35 losing trades in a row in order to knock your account down to half it’s original size. It doesn’t matter what your starting amount is, 35 bad trades at 2% will drop a $10 account to $5 or a million dollar account to $500000. A large account only gives you a safety net if you aren’t using good money management.
If by any chance you have been trading the last few months, you will have realized that the drawdowns have been both whippy and huge — completely unlike what we are all used to.
Given the psychology of the newbie, the tight stops, the constant ability to overtrade, the fears when the account is on the downside and the total lack of experience and KNOWLEDGE OF WHERE THE PRICE WILL GO in the near or far future (they simply dont realize that the trend is unbroken even if the drawdowns are 90%) those losing trades you speak of accumulate very quickly in this particular day and age BECAUSE YOU DO NOT HAVE THE SAFETY NET THAT A LARGER AMOUNT OF MONEY PROVIDES ---- NO NEWB IS GOING TO DO PERFECT MONEY MANAGEMENT, cause if they did, there would be a whole lot more left in the arena to fight !
I have demonstrated (as I stated) that one can start with $250 and do very nicely following the rules and just playing it nice and steady, BUT I am NO newbie, have seven years of active trading behind me, and while certainly not the ne plus ultra of traders, can switch from long term to the 30 second chart in a heartbeat — your average newbie CANNOT DO THAT !
IN THIS PARTICULAR MARKET, considering you are advising newbs with all the faults they bring to the table, $250 is dangerously low for an un-experienced trader to start with.
Not for anything but information, I opened a $500 trust account for my landlords young daughter — working part time, I have grown it over 10% per day using 0.02 lot sizes, but even I would not think of starting the account at
$250 because, as you already pointed out, unless your money management is PERFECT, you need that safety net !
In other words, you are speaking statistically BUT not taking into account the real world of the uneducated newbie ---- I factor the newbie into the equation also, and many a year of experience, including my own, show that statistics are wonderful in a test situation isolated from the touch of humans, but in the real world it doesnt work.
Another way of saying it is - - - - -
[I]In theory, theory and practice are the same
in practice, theory usually blows up ![/I]
I agree with you, mp. Statistically speaking I am correct, but if a newbie messes up and breaks money management rules a larger account would be a safety net. When I first started demoing I figured up my lot sizes on a calculator and there were times I messed up and got the wrong figure. There was one time when I was new that I hit the “buy” button when I meant to hit “sell” and lost over 15% of my account in a matter of minutes. I did all my mistakes on a demo account, but I can see your point if a newbie rushes out and trades real money too soon.
The ideal situation would be to start with a large account, AND always follow your MM rules!
