I’m a newbie on a demo account going through the babypips training school. I don’t intend to start on a real account until i’ve learnt a lot more and achieve profits on demo consistently.
I’ve had a bit of a blow to my hopes though. I don’t have a large starting capital - I’ll likely be opening an account with close to the minimum initial margin requirement. Does that mean I shouldn’t even bother?
low capital & small leverage - i’ll be making pennies and it will be a waste of time.
low capital & large leverage - I could potentially use this to get my way in to the forex market and increase my capital before lowering the leverage I use afterwards - but it makes margin calls extremely likely and so many people advise against newbies using large leverages because of the risk associated.
Can I create an effective investment for myself with little cash or should I just give up before I start?
Depends how little a “little” cash is. But I guess you are talking about a very small amount!
I think you have understood the problem very well and I agree with you that it is a problem for you!
The main constraint will be concerned with where to place your stoploss levels. You need to be able to select sensible levels that, if reached, will have negated the reasons why you entered the trade and will close the position. But these levels may represent too large a risk for a small account and even a couple of such stopped positions will leave you with a considerably weakened account.
On the other hand, placing stops too close to your entry in order to minimise the loss amount will risk being stopped out on short sudden spike move even though you actually had the right view.
If you have been following these forum threads you will have noticed that there is a lot of discussion concerning how many newcomers lose money and how challenging short-term trading can be (i.e. intraday), so it is not going to be easy even with a bigger account. The risks are significant, as you have clearly realised already.
But if you are interested in trading in the long term then you can go a long way with a small account and only trading microlots where you gains and losses can be more in the 1-5 USD range. You are not going to make a lot of money with that but you can gain a lot of useful experience for later on when you have a better opportunity manage larger positions with greater equity behind you.
With all due respect-- WRONG! It won’t be a waste of time. Trading with real money- even if it is with pennies- is a whole different psychology than trading a fake account. I used to think like you do:
“If I just make X amount of trades times X amount of money, I can make X amount of dollars in X amount of time and be rich in two years!” Look, I tell everyone this, a brain surgeon does not go to medical school to make X amount of dollars in X amount of time so he can be rich in X amount of years. He/she winds up that way because he is really good at what he does. He gets good at what he does by going to school, learning as much as possible about his profession, and practicing with and learning from seasoned professionals.
If you want to make at least as much as a brain surgeon, you have to put in the time to get really good at trading. I promise, if you do that, the money will follow.
LEVERAGE SMEVERAGE! It’s all about position size. Have you ever given money to a homeless person on the street? Then use that amount of money as a starting point. Keep your risk per trade really low, in fact, so low that when you lose it, you hardly notice. As your account builds, you can slowly adjust your risk.
I know of a few millionaire traders who keep only $50,000 in their accounts to trade with. When pressed about why they do that, the standard answer is, “because if I have more in there, I might be tempted to trade it.”
I didn’t think of it in that way. I can use my 1-5 USD earnings/losses to gain experience with real cash - whilst slowly adding to my account balance through work earnings. I guess I got a bit greedy and carried away with my idea of earning potential in the first year. Got to get more on the ‘long-term thinking’ bus. I’m normally quite pragmatic but maybe I just got swept away for a moment with the flashy Instagram accounts! Thank you Manxx
You’re right! My thinking was amateur. Maybe it’s seeing successful traders and forgetting how long it took them to reach that stage. Perhaps I was being greedy. I still have a lot to learn, too. If you’d like to know - you’ve revived my hope in forex! Hopefully after a year or so of small trades and adding of funds from work, I’ll be able to step up the game bit by bit! Thanks Steve!
We can make money when already able to understand with market behaviour, sometime we recognized the trend market but lack on discipline also as reason why trader getting loss on trading, which good skill should accompanied with discipline trading
Clearly you know far more millionaire retail traders than I do, in fact I don’t know any who have breached the million mark as of yet. However, I find that statement very hard to digest - and this is why…
Assume you have profits of $1M in liquid cash from trading, from this you deposit $50k into you current retail account which is 5%, as you said above.
Lets now assume these ‘successful millionaire traders’ that you know of manage to make 5% profit per month of the account balance value which has been deposited; (very very optimistic, of course and likely to be much less - which gives this argument even more legs), that equates to monthly profit of $2,500 (5% of $50,000).
But the trader has $1M - so the $2,500 monthly profit is equal to 0.25% of the total account balance of $1M [the choice that the trader has made to only deposit $50k into his/her trading account is irrelevant]
To put this into prospective, a UK savings Bank account can offer perhaps 3% annual interest; this is also equal to the same 0.25% a month flat rate growth.
So this really doesn’t make any sense, at all - a millionaire trader not beating the banks, and if so then on a small margin at best and with considerably more risk?
There is a well known concept, which I’m sure you have heard of? “money makes money”
So why on earth would a successful trader who has $1M only put $50K to work and leave the remaining $950k doing absolutely nothing? I certainly don’t think it’s because of this reason below, do you?
That is the talk of an amateur retail trader - nothing else. I’d like to hope that since he/she has already become a millionaire from trading that they would have the self-control and emotional aspects of trading under control, don’t you? Unless of course they are blowing smoke up your own arse, which is the more likely answer.
Admin - before you remove
When someone is “blowing smoke up your arse” today, it is a figure of speech that means that one person is complimenting another, insincerely most of the time, in order to inflate the ego of the individual being flattered. Back in the late 1700s, however, doctors literally blew smoke up people’s rectums.
Hello Steve, I’m sure you will understand the skepticism of a statement such as this. The math does not work out.
Lets say you make a respectable 26% per year you still need 1.2 mio to make around 300k per year, risking the whole thing, maybe less if you can compound and not take anything out per month. So the 50k is not really, umm, I don’t know, believable, to become a millionaire. Even if the claim is 500% per year, it is only, 250k. Unless they are saying 500 % per month, and of course that’s really, really believable.
The Ever Sky Viper In The World Of Yesterday VIPER
I want to clarify my last post. Some traders, even if they are very well capitalized will have several small accounts for diversification. Please, even if you have 100K, don’t dump it all in one FOREX account. That was my point. I think you are smart enough to get that. The three roaming trolls at the bottom of this thread apparently are not
Now be honest Steve, that was not the context. The context was that a trader would only keep X amount in their account because [quote=“steveepperson, post:3, topic:113489”]
I know of a few millionaire traders who keep only $50,000 in their accounts to trade with. When pressed about why they do that, the standard answer is, “because if I have more in there, I might be tempted to trade it.”
[/quote]
To me that is not logical, from a traders view.
I have heard this before, and have never seen hard evidence of it. If you have a well regulated broker, and you have been with them for years, and they have been around for years, I don’t understand why you would want the hassle of executing on several different platforms? If you were executing let’s say Spot Currency, then hedging with a currency option for a long term trade, well then it makes sense, obviously if your Spot C broker does not provide Options. But wouldn’t breaking up your account be like rolling over an IRA into different companies with the same basic products. For instance, instead of balancing within Vanguard’s different funds, you would pick one from Vanguard, one from Fidelity, etc. knowing they basically perform the same?
Again, if you are afraid of your broker failing, you might as well buy Physical Gold, and bury it in you back yard, in fact let me think about it.
Also there is the fact that you cannot execute against PB’s for less than 80-100k with a 40k unit minimum, so there is that. Along with this FACT, if you are executing Size, generally you would not use much margin, perhaps none, so to execute 40000 units EUR/USD at 1.19439 you would need a little over 47k, which basically brings you right to 50 k.
But if you say you know folks who do this, well I’m not saying you are lying, it just is, well illogical. But as we say in the South, " well bless your heart"
Still waiting for a valid answer Steve - other than regurgitated content that anyone can pick up from a Google search.
My initial feeling is that you actually have little experience, little trading knowledge and are simply trying to put lipstick onto a pig - well guess what? It’s still a pig and it’s been seen here many many times before.
Add some value & communicate constructively…
There are many valid points which have been picked out by myself, TV and Bob… and you fail to address any of them and rather play the ‘troll card’. You’ve successfully made yourself look rather silly by not arguing the points clearly mentioned?
Geez if I did have that capital I certainly would dump it all in my PRIME broker’s account. But I guess like the rest of us you have to use a MM as well.
You can make money with little funds. Well, you won’t earn a lot either. But if you have proper knowledge and desir, everything will be ok. The main thing is not to go beyond your trading limits and your deposit will grow.
Small capital also possible but this is difficult task, in fact so many trader that startup with small capital almost them facing with failure eventually, but indeed if on trading always able to making profit, start with small capital also possible to increasing money and make it grow, skill must good to reached goal
According to my personal trading experience, new traders should focus on learning rather than earning! Besides, they should use low trading leverage, because high leverage inspires to take a healthy trading lots size.
This could refer to investors with $1 million dollars in assets who allocate $50,000 of their portfolios to forex. That’s 5% which is plausible with the remaining 95% allocated to real estate, stocks, bonds, metals and cash.
In that context it would make sense - but by labelling them as a trader it asks the question that they are just trading; not investing in assets. so a pure trader or speculator would not take the approach of working with £50k from £1M - it’s illogical in the context it was described.
perhaps @steveepperson did mean as you described, but like many of his posts here he does a “one post special” and fails to communicate against the descrepances that other experienced trader’s have picked out.
however, it’s nice of you to give him the benefit of doubt…
