What are your thoughts of opening a live account with $250? Has anybody had experiencing doubling or tripling this really quickly?
I have to be honest and tell you that’s $250 is a little low and you�re risking possibly losing most of your money in a very short period of time.
For example, if you only have $250 of trading margin, and you get stopped out for a 50 pip loss. You have now lost 20% of your account! I would recommend at least $10,000 to start, $5,000 the bare bones minimum but I still feel that amount is still way too aggressive. A good idea is once you select your broker, deposit the $250, then demo trade, and whenever you have extra money, continue to deposit it in your live account. Pretty soon you�ll have adequate capital to trade. And you’ll probably be a much better trader! But do not start trading with the live account until then!
One of the biggest mistakes of new traders is being [B]undercapitalized[/B] � meaning they don�t start off with enough money to trade. If doesn�t matter if you�re an experienced trader or you have a kick arse system. If you start off too small, there�s a high probability you will lose all your money because not every trade will be a winner.
[B]ForexNinja[/B] – I like your idea of saving up to a certain level of capital and using the time to demo trade. I understand why being undercapitalized is such a bad thing with most FX dealers. However…
Oanda allows you to trade in fractions of lots. Couldn’t a fledgling trader use a small amount and simply trade proportionally smaller ‘lots’? For instance, I might deposit $500. I can trade $200 at a time (2% of the $10,000 available at 20:1 leverage) and thus remain in good standing with the esteemed advice of the pip school. With these numbers, I could buy 250 units of AUD/USD right now at .8044, making each pip worth 3 cents (.03 dollars). If I then proceed to stop out of the position, I only lose a buck-fifty.
I’ll grant you, I won’t make much money trading at that level, but it seems like it would be okay for troubleshooting. Or maybe as a transition from pure demo trading to actual monetary risk. Does this idea alleviate some of the undercapitalization concerns, or am I missing part of the problem?
I’m afraid Forex Ninja is right on this one,
However something you have stated about opening small positions i do believe these are micro amounts, you would last a lot longer in the game with such a small amount, but don’t expect to make any serious money from it.
The min amount is roughly $10,000 for a mini account.
I would demo or open the micro account, trade your plan, once your ready top up your micro account until your ready to start with a mini!
I am just about to start a new topic on money management. I am new to forex trading, still trying to save the 10,000 that is much need to start a mini account. I stay in australia and do not know of any broker that offer micro account.
For the time being, I am demo trading using GCI.
Ok. Here comes my question. According to most of the experience trader, 10,000 is the minimum for mini account, so let say I finally saved 10,000 ( of course , also with some good track record from demo trading ) and then I open up a mini account.
Based on what I learn from baypips school, one should not risk more than 2% of the total capital for each trade. in this case , it will $200.
So open a position with 1 lot, and set the stop loss at 200 pips ( assuming 1 pip = 1 dollars ) then I will be risking 2% of the total capital ? am I right ?
Another question is , should I open multiple position where each trade will have stop loss at 200 pips and trading with 1 lot ?
so is it ok to open 5 positions each risking 2% of the capital ?
I know this is a greedy question. but I am just trying to explore the maximum benefit while trying to protect my capital.
Thanks in advance for any input Happy Trading !!
I agree and disagree at the same time. With a $250 balance you have very little breathing room for losses if you are trading a mini account. But, and there is a very big but, i think focusing strictly on the pips to manage your risk is missing the point in my opinion. Pips do not reflect your position size and that is what truly matters. As other posters have mentioned, if you can open a micro account that allows you to trade in such a fashion where your position size can be maintained at 2% or less, then your starting balance should not matter.
In the beginning phases, i think training is very important and part of that training is through exposure to the market via live trading. Granted, you won’t make any money on such a balance but in the beginning that should not be a trader’s focus anyway. The idea is to get a feel for taking trades, managing them, and becoming actively involved in the market and making proper decisions
If you are able to open a micro account and trade in such a way that allows you to keep risk to a bare minimum, i think this is good enough to help a trader draw some conclusions or theories about the nature of trading.
Important to note, however, is that if a person plans on becoming a position (long-term) trader, then stops have to be typically much wider and such a balance would never support such an approach, probably even on a micro account
Just my 2 cents.
ForexNinja is right…again. The leverage and spreads will eat through your initial capital deposit very quiclky.
IMHO: For [U]retail traders[/U] FX is a market for risk capital only. By “risk capital”, I mean the money could disappear from your wallet and you wouldn’t notice. If this is your situation, then go ahead and open a mini (right, pipbull, MICRO account!) account somewhere. It’s about the same as online poker with really high rake. If you plan to build a fortune by trading, you are woefully undercapitalized.
I don’t wish to discourage anyone from learning about capital markets and trading, but make sure you’re going in with your eyes wide open. Best of luck…
Not sure if you were responding to my post but the leverage and spreads, in dollar terms, are all relative depending on your position size.
A mini account on a balance of 250$$ is suicide but a micro account, trading 0.10/pip is feasible. Let me give you an example.
If you are trading a day trading strategy and want to take a trade with a 30 pip stop loss, risking 2% of your 250$, is this feasible. Absolutely.
In dollar terms, you would be risking $5.00/(0.10)(30) = 1.67 contracts or 1 contract.
Can anyone tell me what is wrong with taking such a trade? I don’t see the problem. Because you based your trade on a fixed percent risk, then everything is relative; the leverage you use, the spread that is charged in dollar terms and what you stand to lose. I do not see anything here that violates proper risk management rules. Granted, you don’t make much money, but you don’t lose that much either, which makes this perfectly acceptable when trying to expose yourself to markets for the first times
If i am off here, please somebody point it out.
pipbull, Sorry if I was unclear or came off as confrontational ( ). My comments are only meant to be taken as generalizations. I had no intention of discouraging anyone from participating or insulting anyone based on their view or account size. Your math is correct as far as the example you posted and it probably fits within the realm of “reasonable risk” for the account size we are discussing. I take your point about the value of a �real money� trading experience.
There is nothing wrong with micro accounts. I think it�s a great learning tool. The point of the last post is that trading FX only at the micro level can only be realistically viewed as a “hobby”. What is the probability of growing a small account into sufficient size that it can generate enough current income to significantly impact the trader�s life? I’m not sure that it is a reasonable expectation.
I suggest saving enough to be able to safely trade in a mini account before risking your real hard-earned cash. Then make a decision as to whether trading is the most economic use of your time. The markets will be here tomorrow. There is no need to rush into trading or investing in any financial instrument. Just my opinion�
I opened an account with $250. I was doing ok but the problem was i was to scared to runa trade or give enough breathing room so my stops were to tight. Any way i did ok till one day when I was “confident” about the usd being bullish and very optomistic retali sales report before christmas… Needless to say I was right but because i didnt have enough money in my account and i virtually ignored my money management decisions my account got basicaly wiped out. The thing that hurts the most was I was right the dollar was bullish but before it took off it plumeted down and and my broker stopped me out of the trades because i didnt have enough equity. Bottom line I’m trading micros now. and until I have enough money to only risk 2% AND have enough in my account to have proper stop losses I’m going to stick with the micros which is basically practice while I’ saving.
About ForexNinja said, Beginner like me should start with 10,000$ right?
Hey, I can’t speak for Ninja, but I agree with him that you need a very healthy cushion in your account for any level of trading (micro, mini, or standard). johnnykanoo shared his experience. There are thousands of others who have had similar difficulty managing smaller accounts.
I’m beginning to think that no one should be allowed to open an account until they’re not excited about trading.
I agree also that a healty cushion is needed but it has to put into the right perspective. Attaching specific figures as a minumum starting balance puzzles me. For arguement’s sake if you start with 50,000 one might say that is a healthy cushion but that would be totally false if the trader is taking on excessive risk per trade. If you risk 20% of your account balance per trade, then you are not safe no matter what balance you start with.
The point is that you can (and should) start with a very small balance as long as the percent risk per trade is kept to a minimum. The beauty of using micro accounts is that they allow you to do this. I understand that a micro account will not allow your trading to have any kind of meaningful financial impact but that is exactly how it should be in the beginning. By moving the emphasis away from money and shifting it toward proper process, then a trader can get a great start and then eventually add to the account as consistency establishes itself.
Starting with a small balance while at the same time respecting proper risk management allows a trader to focus the right way without worrying about losing his shirt.
I am sure we can all agree that demo trading and live trading are two different creatures. That being said, what do you think is likely to happen by trading demo for months then moving to a 10,000 live account in 1 shot. Take babysteps and work your way to a larger account, depositing a little at a time as you meet certain progress goals
And finally, i would remove the word “excitment” from consideration. Excitement and making money do not belong in the same phrase (at least as it applies to trading)
Just my thoughts:
Lets say you have…
10K balance in your acct. at 50:1
you take a 1 lot 10k position
BUT, you have 100 pips to lose before you hit 1% of your acct, thats the 1% risk
if someone has 1k balance at 5:1
they take .1 lot (1k) position
Then again, you have 100 pips to lose before you hit 1% of your acct.
I dont think it’s the size of your balance is whats going to save you, its the size of the position you take. Just handle the money accordingly. I think, I’m a bit new too.
Hey, pipbull! I couldn’t agree with you more on your statement regarding the need to observe proper conservative money management regardless of account size. Certainly I have no desire to argue with you and please understand that my comments (sometimes sarcastic) are just personal opinions. This is why many of my comments are qualified by the use of terms such as “perhaps, may, might, could, etc.” I have no vested interest in this site other than to observe, learn, and share thoughts.
To restate: If you decide to trade FX, then no matter what size account you have you need to be conservative in use of leverage and exercise good money management.
Since you quoted me, I’ll respond to you: I sincerely hope that you’re not taking issue with my comments just because I am new to this forum. I am not new to finance or trading. I don’t see any of my comments that attach a specific figure as a minimum starting account balance. It seems you have some confusion regarding my point of view about FX in general. I believe that very little of a prospective trader’s portfolio (risk capital only) should be allocated to any “high risk” trading vehicle - including FX. For individuals who are new to trading of any sort, I believe FX is not the best place to begin learning about markets and trading in general. So for those who do start trading FX, definitely start small. Just my opinion.
Finally, and with all due respect, please re-read my comment about “trading excitement.” My point is that there seems to be a rush to get involved in these markets (people are excited� because they’re gonna be [U]rich[/U]!!!). There is a lot of hype and misleading information circulating about the prospects for profit in forex trading and many of the people lurking these boards want to [U]get [U]started right[/U] now[/U] whether they�re financially ready or not. (We’re all gonna be [U]rich[/U]!!!). Sorry for the confusion…and the sarcasm. It�s truly nothing personal.
[I don’t want to hijack this thread for a personal discussion. If you wish to correspond further, we should either start a different thread or do so privately.]
no worries Toptick. I offer my apologies if i sounded defensive. It was defintiely not my intention. As you say, the idea here is to learn and exchange ideas. I guess i have certain hot buttons when it comes to topics like risk management. The thing i like about FX is its flexibility compared to other markets, especially being able to control your position sizes down to the most minimal levels. It really gives the small guys (who are serious) a reasonable chance to participate and succeed. So when i start to hear things like you need this amount or that amount to start, i get a little hot under the collar because i find it can be misleading to those who want to start who don’t yet understand the ins and outs.
Anyhow, nothing was ever taken personal and we are on the same page. I do understand and fully agree with you on the “excitement” aspect as you explain it.
Take care and great trading.
Thanks, pipbull. Good luck in your trading as well.
(does this mean we’re not [U]gonna get rich[/U]?)