How much money you really need to start trading the forex market is one of the most asked questions inside the trader’s mind.
$10 or $100 or $1000 or $10000 ???
Before thinking about this question, ask yourself, How much money you are affordable to lose in this risky market?
Let’s see different important factors you need to consider before investing in this forex market.
1) Investing depend on your Affordable Money to lose
Let’s say “My affordable money per month is 50 USD, I can invest only 50 USD in the market”
Important Note: All financial markets carry high risk and rewards, forex trading is the zero-sum game. Meaning, Your trading account balance (invested money) can become ZERO.
In the Share market, the share prices don’t become zero, but in the forex market, your investment can become zero. This is why I recommend you to invest only affordable money in this forex market.
For 50 USD, I should not open the “US Dollar” Account instead, I should have to open the “US Cent” Account. Meaning, 1 USD = 100 Cents. If I invest 50 USD in Cent Account type (Micro account), I will get 5000 Cents as my trading balance. If my trading balance is bigger, it is easy to manage my trading account.
It doesn’t matter whether your account type is in “US Dollar” or “US Cent”, you are going to follow the same Money Management rules for both of your account types. Check here how much lot size you need to place on your trading account?
If you are going to invest more than 500 USD, you can open a “US Dollar” Account, otherwise, If you are going to invest below 500 USD, then invest your money only in the micro account or cent account of your forex broker.
2) Trading Style
What is my trading style? and Strategy?
Am I the intraday trader, scalper, swing trader or long term trader?
Depend on my trading style, I should choose my account balance.
Forex is a big jungle that requires psychology in decision making. Opening an account depending on your trading style should require some minimum amount of capital for trading properly on your forex account.
What is the minimum balance required to start trading forex?
Intraday trader = 500 USD
Scalping trader = 200 USD
Swing trader = 2000 USD
Long term trader = 5000 USD
As per my experience as a risk manager, broker-dealer and 19+ Years Experienced forex trader, I highly recommend you to start trading with the above minimum deposit depending on your trading style.
3) Your Trading Time
How long you spend time trading the forex market? Forex market works 24 hours, but you should choose which time or trading session is suitable for you.
Asian Session – Japan, Australia, New Zealand Currencies have good movement (volatility)
UK Session – Euro, Pound, Swiss Franc Currency pairs have good movements.
US Session – All USD Currency pairs, Commodities like Gold, Crude oil, Silver have good movements.
First, choose your trading session and then sit in front of your trading screen. Don’t trade forex whenever you are free, Please note: when you are ready to place the trade at wrong market times, you will definitely get lost. when you place the trade at best trade setup which is found with patience, then you will get good profits.
Don’t trade forex like your Day Job
Don’t place the trade immediately after you start to see the chart. Trading is not like your day job. As a professional trader, A trader is doing his job, when he/she is doing this following this:
1) Analysing the charts
2) Waiting with patience for the good trade setup.
3) Taking action only when the alert hits
4) Placing the trade only after the confirmation
5) Doing nothing, just watching the markets without placing any trades.
6) Practicing and backtesting new trading skills in the demo account.
7) Analyzing more and trading less.
A good successful trader will be doing these above things instead of doing over trades like a bad trader.
4) Your Trading Currency Pair
Which forex currency pair you are trading the most? what is your favourite trading market?
Some currency pairs move less, some currency pairs move more with high volume.
Choose the best currency pair depends on the daily movement range, volatility, etc. that suits your trading account balance.
If you are trading USD Currency pairs, you can trade mostly at US Session. Asian Currency pairs like Japanese Yen, Australian Dollar, you can trade at the Asian session. In the UK session, you can trade the European and Pound currency pairs for good volatility which contains more number of buyers and sellers in the market.
During these different active sessions, depending on volatility, the spread commission will get reduced in your forex broker.
Which currency pair is easy to predict? The Most Predictable Currency Pairs list: check here.
2. How much money do you need to open a forex trading account?
Minimum 10 USD is enough to open a forex trading account. Depend on your country, government regulations each forex brokers offers different types of account such as
These three names refer to the number of units you’re allowed to trade. This brings us to the names of various lots or units that you will buy or sell.
In the normal USD accounts, 1 Standard lot = 1 lot, 1 Mini lot = 0.10 lot, 1 Micro lot = 0.01 lot
ECN/STP account types have small leverage and the broker makes money only from your commissions. because it’s a Non-dealing desk account.
All other account types have high leverage because broker encourages you to lose money on these account types. Because this is a Dealing desk account which means, your loss = broker profits, you made profit = broker need to pay you the profit from their own pockets. In one word we can say it as “CASINO” Account types for all dealing desk accounts.
3) How much money do I need to start day trading?
For Day trading, You need a minimum of 500 USD balance to start doing intraday trading. Intraday requires more time and attention to the market charts. You should have to be ready to spend a few hours sitting in front of the charts daily.
For 500 USD trading balance,
Place maximum lot size of 0.01 lot on each trade.
Maximum open trade = 5 trades
Total open trades lot size should be maximum 0.05 lots (0.01 lot x 5 trades = 0.05 lots)
If your TP is 20 pips, SL is 10 pips.
5 trades win, 0 trades lost = 100 pips maximum profit per day
4 trades win, 1 trade lost = 70 pips
3 trades win, 2 trades lost = 40 pips
2 trades win, 3 trades lost = 10 pips
1 trade win, 4 trades lost = -20 pips
0 wins, 5 lost = -50 pips loss maximum per day
If you look out this above intraday strategy plan, you can see that if you just win 2 trades and lost 3 trades, you still stay in profit of +10 pips. If your trading accuracy is 40%, you still can make a profit using this above pip management strategy.
The beginners in Intraday trading faces High stress, low winning ratio, lack of confidence in their trade setups, Seeing trading as gambling, Overtrading, Trading against the trend, losing the money continuously, Expecting big movements immediately and hoping for big profits to recover all the losses. These are also the mentality of most of the new forex traders.
How to do day trading depends on the daily range limit?
If you know the average daily movement limit of each currency pair, you can trade safely with minimal risk.
Let’s see the daily ranging movement of different currency pairs with examples:
EURUSD moves from a minimum of 40 pips to a maximum of 200 pips per day. The average daily movement of EURUSD is around 50 pips.
Gold moves from minimum 70 pips to maximum 1000 pips per day. The average daily movement of Gold is 100 pips.
If you are trading on EURUSD, you need to know that the EURUSD can move 50 pips easier in 1 day, it means you can set a stop loss at the maximum of 50 pips on EURUSD trades. Similarly, if you are trading on Gold XAUUSD, you can set a maximum stop loss of 100 pips on your intraday trade. Setting the stop loss at the daily range movement reduces the big risk of losing more money in a day.
Intraday traders should always beware of daily movement nature of each currency markets.
How much money do I need to start Swing Trading?
2000 USD is a good start for swing trading. Swing trading requires patience and time.
No need to spend more hours in front of the screen. Don’t need to watch the market prices daily instead just watch the market a few times a week is enough.
Who can do the swing trading?
Those who have a day job and don’t have enough time to watch the charts can go for swing trading. Swing trade is most suitable and easy to adapt to the new traders. But they should have to follow strict money management and trading discipline.
How much money do I need to start Position trade in forex?
5000 USD is a good start for positional trading. Position trading requires more patience and time. Need to wait for a few months time to reach your desire target.
No need to spend more hours in front of the screen. Don’t need to watch the market prices daily instead just watch the market Monthly 1 or 2 times is enough.
Who can do the Position trading?
Position trading is for the investors, not for the manipulative traders. Position traders don’t care about the
Those who have a day job or other main business and don’t have enough time to watch the charts can go for Position trading.
Position traders are long term traders and investors who don’t care about the big market movements or manipulative market movements. They focus on long term trading goals and big profits in single trade.
Example: A positional trader can make a 100% return in a single trade.
There will be no stress in position trading because it is a long term trading and the open trades will not get loss or profit faster.
If the market moves big, they will make big, if the market moves less, they make less.
This is how the positional trader trades the forex market to see big profits.
5. What is forex Brokers Minimum Position Size and Maximum Leverage?
Forex brokers offers different settings for different types of trading accounts.
A forex broker may have the condition to their traders to place a minimum volume lot size for each trades.
Minimum trading lot = 0.10 lot (most of the brokers allow minimum lot size 0.01 )
Maximum trading lot = 10 lots (some broker allows maximum up to 100 lots)
All forex brokers offer minimum leverage of 1:1, but the maximum leverage differs for each broker.
Maximum leverage = 1:1000 (most of the brokers allow a maximum of 1:500 leverage in the dealing desk accounts)
6. Main mistakes people with low capital make while trading forex?
Here we consider the people with below 500 USD trading balance as a low capital trader.
1) Low Capital traders trading in a “US Dollar account” instead they should deposit in a micro or cent account of their forex broker. In the cent or micro account types, they get big balances which really helps them to trade better than the USD accounts.
2) Low Capital with High Leverage results in High lot trading which leads to big losses or washout of the trading balance.
Brokers offer high leverage for low capital deposits because the low capital can’t make big money easier using the high leverage, instead, they always need to lose their trading account because of the lack of capital. Broker encourages traders to trade more to gain more commissions, please beware of scam forex brokers.
3) Trading against the trend – If you have a small capital, always trade along with trend. The entry and exit is very important for low deposit trading account.
1) If the market is moving in an Uptrend, place only Buy order, never place sell order (against the uptrend).
2) Buy only at the higher low zones, never buy in the middle of the trend or at the higher high zones.
4) Trading without Stop loss – No stop loss for small trading accounts = Forget your money in that trading account.
If you are buying at the correct higher low zone in an Uptrend line, Place stop loss at the previous low zone.
5) Dreaming of getting big profits using the small money
As you have heard about some crazy ads that shows “I turned my 100$ into 10,000$ in few days, invest now with me”. If a person can turn 100$ to 10k$, why he/she need to ask 100$ to you? Please think about it dear friends. Don’t fall into this trading scams.
Forex trading industry is filled with marketers instead of real traders.
Never believe the people who say this following words in the forex trading industry:
2) No loss
3) Get rich Quick
4) 100% Success
5) Secret Trading Formula
This is how the scam forex services such as EA, Auto Robot trading, Copy trading, Forex Fund Management, Forex Signal providers says to the innocent people. Never, ever believe these kinds of people. if you saw anyone of this above words on the Scammers website, please leave the site right away without wasting time and keep looking for genuine forex services.
6) Stop out level hits easier – A low balance trader should always beware of their stop out levels of their account type. Your brokerage has certain stop out levels which is not known to you unless you look out their website in detail. If you have a small account without much capital at your starting point, but you want to trade with little high lot, your broker demands high margin requirements to take high lot trades.
For a small amount, You should open an account with a low leverage ratio to start forex trading using proper risk management and amount of money you need to risk per trade.
7) Trading with a big balance on Demo, but the Very small balance on a real account. This will create an emotional fight between your heart and mind.
A forex trader start forex trading in forex account should have to know how to trade forex properly using risk management per trade, risk capital depends on account size, position lot sizes, trading styles such as price action, chart patterns, circumstances depend on trade opportunity, etc.
Performance of the best forex signal provider has low pip stop loss levels for day trader, swing traders, positional trader with low-risk reward ratio. Less margin requirement is suitable for Forex day trading, but not suitable for swing trade forex and positional trading system. Because the probabilities, possibility and commitment behind the forex broker are so risky.
Your trading experience is going to rock soon if you choose the best minimum trading balance for your trading styles.
Don’t trade all the time, trade forex only at the best setup to enjoy forex trading.
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