How Much Capital to Start Trading Forex?
Nowadays, it is normal for retail Forex brokers to offer trading accounts from as little as $1. Of course, when you start trading with such a low capital, you cannot earn anything significant without resorting to pure gambling. But where is the limit that separates 'just trying the taste of Forex' from 'serious trading to earn your payroll'?
Obviously, the answer largely depends on the scale of earnings you need to sustain yourself. Someone who can live on $100/month needs a much lower starting FX capital than someone who is living on $10,000/month. Yet, there are independent parameters that make some account sizes more viable than others.
How flexible can you be in your trades with your account balance? For example, if you have a $1,000 account with a broker that offers just 1:10 leverage, even with
How big of a drawdown or a losing streak can you tolerate? Of course, putting only a small part of your account (like 1–2%) to risk at each trade is a good way to avoid deep drawdowns. At the same time, such prudent money management can rarely be practiced if your account size is too small. Unfettered risking results in fast depletion of trading funds when a particularly long streak of losing trades hits your bottom line.
How diversified can your trading be? With tighter balance restrictions, you can open just several trades simultaneously. What if a valid trading signal appears on some new currency pair? You would have to skip it if you don't enough capital. More money lets you participate in more markets. This is especially important if you add CFDs to your range of trading instruments.
How seriously will your broker treat your account? Of course, it is unethical for a broker to offer
How will your deposit/withdrawal fees compare to the size of your account? No sane trader would spend $30 on a bank wire transfer to deposit $1 into a trading account. However, even if you are depositing or withdrawing $1,000 from your trading account, paying $30 results in a 3% loss. When the same amount is charged from a $30,000 transfer it becomes a mere 0.1%.
Professional FX traders agree that trading with anything less than $10,000 can be done for educational purpose only. Up from that amount, we are talking about a serious business and realistic possibilities for trading profits that could be used as an additional or even main source of income.
If you want to talk about what you consider an optimal capital size to trade and earn your living with currency trading, you can do so on our Forex forum.