How much capital is enough to start?

[zF15z]

Hi,

I am looking to open a forex trading account. I know that higher capital at the start is beneficial for trading and the greater your starting capital the more likely you are to succeed; reduced trading costs etc.

My question is, how much would you recommend to start trading and not be screwed over in a matter of days/weeks by a few consecutive losses and transaction costs. Obviously leverage affects this, but what would you say is a good balance?

Would £2000 be enough; would it be enough if I would like to increase my account size by 0.5% a day? How much leverage should be used?

Thank you,

[TalonD]

$10 with Oanda. It’s not how much that matters. It’s percent that matters. If you can’t grow $10 into $20 then go back to demo for a while. And if you can double 10 to 20… then how many more times do you need to double to build up to 2000 ?

20, 40, 80, 160, 320, 640, 1280, bingo… and by that time you’ll be really good at it.

0.5% per day is a realistic goal. I’m getting about 1% per day. And I do that without using leverage. my trade size is the same as my account size.

[Master_Tang]

To add to what Talon said, ANY amount that you consider DISPOSABLE.

Don’t use money you may have to count on.

Use only what you can afford to lose.

[fihunts]

Noob to noob here. My first live account I started with 500, but I tanked it for about 260 doing mini lots. I withdrew the remainder of my funds and went back to the demo accounts and pips school of love. Month or so later, I am with what I feel is a really good broker (IBFX). I have had no real issues except for the stinkin triple swap that hit me today that basically tanked my scalp that I was doing.

Anyway, before I go off on a tangent, I did get back in for 100 bucks and that is more than enough to learn live trading, (emotional trading real money). I am doing most my trades with leverage of 50:1 and lot sizes of 0.05 or 5 nano lots. Basically that amounts to 13 bucks of my margin and each pip works out to a nickle each when working the eurusd.

I have a simple goal of 2% per month on return which if it plays out that would work out to 24% in simple interest return on my money over a years time. I also have no intention of pulling anything out for a long time. Yes, I know that seems like nothing, but the goal serves to standardize my trading practices. It also may serve to train my mind hopefully to not get greedy. Which, I’ve gotten greedy already a couple times and it bit me in the butt.

The latest strategy that I have been learning today is the “3 ducks” which seems to be pretty straight forward. It’s definitely going to take some practice, but still a really nice strategy to start working with. It’s located here on babypips, you might like it. 301 Moved Permanently

Anyway, good luck!

fi

[Clint]

…my trade size is the same as my account size.

I wonder how many people read that statement, and just breezed past it, without grasping the importance of it.

---

In order to answer the question, “How much capital is enough to start?”, you need to answer three other questions first:

(1) Do you know how to trade? As Mike (TalonD) put it: can you grow $10 into $20? And then double it again?
And again, and again, into the future?

(2) How much cash do you have for venturing into currency trading? This means cash you can lose, without affecting your life-style, without upsetting your family budget, and without causing you to lose sleep or develop an ulcer.
This is the question that Jay (Master Tang) addressed in his post.

(3) Can you adjust your trading to a size that is appropriate for the size of your account? This is the question that Mike answered (for himself) in the quote above.

---

To the Original Poster:

You haven’t given any indication that you know how to trade. Increasing your account by 0.5% per day doesn’t happen just because you have deposited a certain sum of money into a forex trading account. It happens because (and ONLY IF) you know how to trade. If you can’t answer question (1) with a “yes”, without any hesitation, then skip questions (2) and (3), and concentrate on training yourself to trade IN DEMO.

You have indicated that you have £2000 available for trading. Be honest with yourself, and make sure that your £2000 actually meet the criteria in question (2), and the criteria offered by Master Tang.

As for position size vs. account size, extrapolate what Mike said, to cover all of the available types of accounts:

To open a STANDARD ACCOUNT (lot size 100,000 units), $100,000 or £100000 is recommended.

To open a MINI ACCOUNT (lot size 10,000 units), $10,000 or £10000 is recommended.

To open a MICRO ACCOUNT (lot size 1,000 units), $1,000 or £1000 is recommended.

To open a NANO ACCOUNT (lot size 100 units), $100 or £100 is recommended.

To open an OANDA-type [I]non-lot[/I] account (min. trade size 1 unit), any (tiny) amount will get you started.

…and then, trade 1 lot (or 1 unit) at a time.

In other words, do as Mike does, and trade positions equal to the size of your account.

Those recommendations are strictly my own. I don’t happen to remember what the Babypips School recommends.

[fihunts]

I wonder how many people read that statement, and just breezed past it, without grasping the importance of it.

---

In order to answer the question, “How much capital is enough to start?”, you need to answer three other questions first:

(1) Do you know how to trade? As Mike (TalonD) put it: can you grow $10 into $20? And then double it again?
And again, and again, into the future?

(2) How much cash do you have for venturing into currency trading? This means cash you can lose, without affecting your life-style, without upsetting your family budget, and without causing you to lose sleep or develop an ulcer.
This is the question that Jay (Master Tang) addressed in his post.

(3) Can you adjust your trading to a size that is appropriate for the size of your account? This is the question that Mike answered (for himself) in the quote above.

---

To the Original Poster:

You haven’t given any indication that you know how to trade. Increasing your account by 0.5% per day doesn’t happen because you have deposited a certain sum of money into a forex trading account. It happens because (and ONLY IF) you know how to trade. If you can’t answer question (1) with a “yes”, without any hesitation, then skip questions (2) and (3), and concentrate on training yourself to trade IN DEMO.

You have indicated that you have £2000 available for trading. Be honest with yourself, and make sure that your £2000 actually meet the criteria in question (2), and the criteria offered by Master Tang.

As for position size vs. account size, extrapolate what Mike said, to cover all of the available types of accounts:

To open a STANDARD ACCOUNT (lot size 100,000 units), $100,000 or £100000 is recommended.

To open a MINI ACCOUNT (lot size 10,000 units), $10,000 or £10000 is recommended.

To open a MICRO ACCOUNT (lot size 1,000 units), $1,000 or £1000 is recommended.

To open a NANO ACCOUNT (lot size 100 units), $100 or £100 is recommended.

To open an OANDA-type [I]non-lot[/I] account (min. trade size 1 unit), any (tiny) amount will get you started.

…and then, trade 1 lot (or 1 unit) at a time.

In other words, do as Mike does, and trade positions equal to the size of your account.

Those recommendations are strictly my own. I don’t happen to remember what the Babypips School recommends.

hehe, Clint, back to your old tricks. Always helping out the noob! Bless ya brother!

[Master_Tang]

I wonder how many people read that statement, and just breezed past it, without grasping the importance of it.

It would never register if all you were seeing was dollar signs…

[fihunts]

It would never register if all you were seeing was dollar signs…

I actually might have got it, but not sure. My account size maybe being exactly what I am willing to lose at any given point without effecting my life? Not so much the actual balance of my account, but won’t make me emotional?

[Master_Tang]

I actually might have got it, but not sure. My account size maybe being exactly what I am willing to lose at any given point without effecting my life? Not so much the actual balance of my account, but won’t make me emotional?

It has nothing to do with the amount you are willing to lose.
It has everything to do with the amounts you DO lose.

[fihunts]

It has nothing to do with the amount you are willing to lose.
It has everything to do with the amounts you DO lose.

Okay, sometimes I am just not all that bright. How does you saying that the amount that you DO lose relate to you saying that you trade your account in every trade?

“0.5% per day is a realistic goal. I’m getting about 1% per day. And I do that without using leverage. my trade size is the same as my account size.”?

I’m not completely following you here, I seem to be getting mixed messages.

edit its like you are saying you win like maybe 51% of the time?.. heck i don’t know now.

[Clint]

…I’m not completely following you here, I seem to be getting mixed messages.

Okay, let’s take it from the top. Let’s say:

(1) You know how to trade. You have proven this to yourself over several months of consistently profitable DEMO trading.

(2) You have $1,000 which you can spend/invest/lose/waste/whatever, and it won’t mess up your life, piss off your wife, or keep you awake at night. This is the amount you decide to use to try this forex gig.

(3) You take my recommendation, and open a MICRO ACCOUNT with your $1,000. A MICRO ACCOUNT let’s you trade in increments of 1-micro-lot — that is, in increments of $1,000. You can trade 1 micro lot ($1,000), 2 micro-lots ($2,000), etc.

Following Mike’s example, you decide to limit your position size to 1 micro-lot (worth $1,000), in every trade, even though your broker offers you 50:1 leverage and says that you can trade up to 50 micro-lots (worth $50,000) at one time. So, your account balance is $1,000 and your position size will be $1,000. This is what Mike means when he says his position size equals his account size.

None of the above has anything to do with the risk you will take on any trade. You can strictly limit your risk, by taking only those trades in which a stop-loss of 100 pips or less is indicated — this insures that you will not lose more than 1% of your account balance on any one trade. (If you don’t understand the math behind that statement, ask about it.) On the other hand, if you have a death-wish, you can trade without stop-losses, and watch the market eat your account.

Let’s review:

Position size ($1,000) = account size ($1,000). In other words, actual leverage used = 1:1 (or, to be more precise, no leverage is being used).

The amount you place at risk each time you enter a position now depends only on your stop-loss. You can limit your risk to 1% (of your $1,000 account balance), or even much less. A 50-pip stop-loss will limit your risk to 0.5%. A 40-pip stop-loss will limit your risk to 0.4%. And so forth.

[fihunts]

Okay, let’s take it from the top. Let’s say:

(1) You know how to trade. You have proven this to yourself over several months of consistently profitable DEMO trading.

(2) You have $1,000 which you can spend/invest/lose/waste/whatever, and it won’t mess up your life, piss off your wife, or keep you awake at night. This is the amount you decide to use to try this forex gig.

(3) You take my recommendation, and open a MICRO ACCOUNT with your $1,000. A MICRO ACCOUNT let’s you trade in increments of 1-micro-lot — that is, in increments of $1,000. You can trade 1 micro lot ($1,000), 2 micro-lots ($2,000), etc.

Following Mike’s example, you decide to limit your position size to 1 micro-lot (worth $1,000), in every trade, even though your broker offers you 50:1 leverage and says that you can trade up to 50 micro-lots (worth $50,000) at one time. So, your account balance is $1,000 and your position size will be $1,000. This is what Mike means when he says his position size equals his account size.

None of the above has anything to do with the risk you will take on any trade. You can strictly limit your risk, by taking only those trades in which a stop-loss of 100 pips or less is indicated — this insures that you will not lose more than 1% of your account balance on any one trade. (If you don’t understand the math behind that statement, ask about it.) On the other hand, if you have a death-wish, you can trade without stop-losses, and watch the market eat your account.

Let’s review:

Position size ($1,000) = account size ($1,000). In other words, actual leverage used = 1:1 (or, to be more precise, no leverage is being used).

The amount you place at risk each time you enter a position now depends only on your stop-loss. You can limit your risk to 1% (of your $1,000 account balance), or even much less. A 50-pip stop-loss will limit your risk to 0.5%. A 40-pip stop-loss will limit your risk to 0.4%. And so forth.

Bah! BRICK IN HEAD! I gotcha! I wasn’t looking at it the right way he was saying. He never really challenges his account unless he just takes a position and walks away for a month or so…

Just making sure I got this right, He will only take a position that is equal to his actual account value. So if he is in an account that is 50:1 leverage. All his trades are going to be = to 1/50th of what his broker would allow him to take?

I really gotta stop drinking beer this late. I think I am gonna give you an ulser.

[fihunts]

okay, so I am sitting on right at 200 bucks in my account and have 50:1 lev. I want to do 2% trades. So, if I am reading you correctly, my trades should not exceed 4 dollar margins? or am I getting close?

edit - I think I still might have it wrong.

[purplepatchforex]

My view is, why bother with more than $100 or $200 dollars say, why put $2,000 in, even if you are prepared to loose it, just keep it until you have a trading record under your belt, the chances are about 99.999999999% that you will loose it, spend it on beer or a holiday.

There are some great answers on this thread, and 100% correct, but if you open an account where you can trade with a few hundred dollars, you’ll soon get to see how what you risk and gain and loose affects your capital, use $100, then it’s easy to work out what would happen with a $1000, just add a 0 to everything, so when your $100 becomes $10, you know with a $1000 you would have lost $900 - simple.

[Master_Tang]

Bah! BRICK IN HEAD! I gotcha! I wasn’t looking at it the right way he was saying. He never really challenges his account unless he just takes a position and walks away for a month or so…

Wrong way to look at it.

His account will NEVER be challenged in terms of risk, trading like this. And it’s intentional.

Were he to average even .75% daily, the results are astounding.

.75 daily x 5 days a week = 3.75 weekly x 50 weeks = 187.5% annually

(I did 50 weeks to allow for missed days, and holidays)

$1,000.00 at 187.5% compounded annually, and over 10 years looks like this:

1 : $5,709.8
2 : $32,601.82
3 : $186,149.91
4 : $1,062,878.92
5 : $6,068,826.82
6 : $34,651,791.59
7 : $197,854,823.66
8 : $1,129,711,609.25
9 : $6,450,428,129.3
10 : $36,830,659,002.08

Is that practical? No.
At some point, you’re going to take even more risk off the table, and downsize your lots considerably.

But the moral of the story is consistency + compounding = account growth.

Just making sure I got this right, He will only take a position that is equal to his actual account value. So if he is in an account that is 50:1 leverage. All his trades are going to be = to 1/50th of what his broker would allow him to take?

$1,000 lot size on the E/U leveraged at 50:1 would be roughly $27.00.

That leaves you $973.00 of usable margin.

Even if you traded that micro lot stopless, price would have to move against you 9,730 pips to close your account.

The E/U hasn’t moved that far in it’s existence.

See how risk is diminished?

It’s not the game, it’s how you play it.
Preservation of capital is mission #1.

[purplepatchforex]

okay, so I am sitting on right at 200 bucks in my account and have 50:1 lev. I want to do 2% trades. So, if I am reading you correctly, my trades should not exceed 4 dollar margins? or am I getting close?

edit - I think I still might have it wrong.

Try it, it’ll cost a few dollars but that’s the cost of learning. If your using Oanda, you can set your ‘default order size’ in percentage in your user preferences, top box underneath the ‘Trading Tab’

[fihunts]

My view is, why bother with more than $100 or $200 dollars say, why put $2,000 in, even if you are prepared to loose it, just keep it until you have a trading record under your belt, the chances are about 99.999999999% that you will loose it, spend it on beer or a holiday.

There are some great answers on this thread, and 100% correct, but if you open an account where you can trade with a few hundred dollars, you’ll soon get to see how what you risk and gain and loose affects your capital, use $100, then it’s easy to work out what would happen with a $1000, just add a 0 to everything, so when your $100 becomes $10, you know with a $1000 you would have lost $900 - simple.

Purple, I’m just trying to work things out in my head is all. The money management thing throws me for a loop sometimes. I know I am going to lose sometimes and probably lose some profits when I pull out of a trade too soon sometimes. I get that. I was just trying to figure out what the “I only trade what I have in my account” was about. It threw me, being a noob is all.

and yes, I probably shouldn’t be trading if I don’t understand it completely. But it is disposable income at the moment and as much as I would love to sit on these forums talking about how much money I have made on a demo account. I am concerned with my live trade account now. It isn’t so easy now. My now invested 200 bucks is now worth 197.89 after almost 2 weeks. Thats a 1% loss so far.

[Master_Tang]

okay, so I am sitting on right at 200 bucks in my account and have 50:1 lev. I want to do 2% trades. So, if I am reading you correctly, my trades should not exceed 4 dollar margins? or am I getting close?

edit - I think I still might have it wrong.

You have the percentage right, but the idea behind it needs clarification.

If you were trading a $200.00 account, using Talon’s lot size equation, you would be allowed to trade two [I]nano[/I] lots. So, using that ratio, you would be trading 2 cent pips.

To hit your $4.00 stop, price would have to move 200 pips against you.
To reach your daily one percent, you would need to garner 100 pips.

Are the cobwebs clearing off from that brick shot yet?

[fihunts]

Wrong way to look at it.

His account will NEVER be challenged in terms of risk, trading like this. And it’s intentional.

Were he to average even .75% daily, the results are astounding.

.75 daily x 5 days a week = 3.75 weekly x 50 weeks = 187.5% annually

(I did 50 weeks to allow for missed days, and holidays)

$1,000.00 at 187.5% compounded annually, and over 10 years looks like this:

1 : $5,709.8
2 : $32,601.82
3 : $186,149.91
4 : $1,062,878.92
5 : $6,068,826.82
6 : $34,651,791.59
7 : $197,854,823.66
8 : $1,129,711,609.25
9 : $6,450,428,129.3
10 : $36,830,659,002.08

Is that practical? No.
At some point, you’re going to take even more risk off the table, and downsize your lots considerably.

But the moral of the story is consistency + compounding = account growth.

$1,000 lot size on the E/U leveraged at 50:1 would be roughly $27.00.

That leaves you $973.00 of usable margin.

Even if you traded that micro lot stopless, price would have to move against you 9,730 pips to close your account.

The E/U hasn’t moved that far in it’s existence.

See how risk is diminished?

It’s not the game, it’s how you play it.
Preservation of capital is mission #1.

Yeah, I’m getting you. Some of it is really starting to sink in. Sometimes you guys just talk symantecs and had you said it a different way it would of clicked in the first place. I’m just an old computer geek trying to learn this crap and sometimes… I swear you say it backwards to me. Sorry about being slow.

[fihunts]

You have the percentage right, but the idea behind it needs clarification.

If you were trading a $200.00 account, using Talon’s lot size equation, you would be allowed to trade two [I]nano[/I] lots. So, using that ratio, you would be trading 2 cent pips.

To hit your $4.00 stop, price would have to move 200 pips against you.
To reach your daily one percent, you would need to garner 100 pips.

Are the cobwebs clearing off from that brick shot yet?

Actually, they are and ive been close to the mark on that lately. I’ve been doing on average 500 lots sizes… woops! which worked out to a nickle a pip. Initially I was doing 10, 15 and 20 cents and really didn’t have a rhyme or reason to it. I hurt the account doing that. Since the 500 or 5 nano hasn’t hurt me much at all. I think you are right though. I need to reduce my exposure even more and get down to 2-3 nano’s for a bit. No sense in throwing money away right?