Advance in technology has made is easy for people to access online forex brokers. The number of trading platforms have also mushroomed in recent years. This has made many people to try their luck in forex trading. If you have decided to make money through forex trading, then one question that you must be asking yourself is; How much money do you need to start forex trading Business? One thing about forex trading is that the amount that you invest will determine the profits that you will make. This means that if you invest small amount, then you should expect small profits and vice versa.
How much money do you need to start forex trading ?
This question does not have a definite answer there is no certain exact amount that you need to have in order to invest in forex trading. It all depends with your financial capability and what you are planning to achieve from forex trading. The main objective of any forex trader is to invest small amount of money and generate huge profits. However, if you are planning to invest small amount of money, then you need to be patient enough because it will take time before you start generating huge profits. Unfortunately most traders are usually not willing to take this path. They prefer taking huge risk hoping that it will pay off. Although it is well known that experienced traders only make about 15% of profits each year through forex trading, most novices usually believe that they can make more than that and hence take more risk. However, in the long run, they usually end up losing substantial amount of money.
When investing on forex trading, you also need to know there are other miscellaneous costs that will eat up good portion of your profits. In fact, the moment you start trading, you will be 5% short of your initial capital outlay. The 5% covers slippage and cost of entering trade. However, if you make profit one tick per round, then you will cover slippage and cost of entering trade. If you are a beginner, you should not aim for large profits at first. Instead, you should be patient and allow yourself to grow. Traders with small accounts are usually affected more by fees, commissions and spread when compared to traders with larger accounts. This means that making a profits of just one tick is not easy as many people think. If you want to make good profits from forex trading, then experts advice that you should trade 5 contracts a day instead of trading one single contract 10 times a day.
Should traders use leverage?
Forex trading requires certain tools to increase profits. Leverage is one of those crucial tools. With leverage, you can assume high position when compared to what you will if you only use your capital. When using leverage, experts advise that you should not risk more than one percent of your initial investment. For instance if your initial capital is $1000, then you should not risk more than $10. Don’t be tempted to take too much risk in the hope making huge profits. Instead mange your risk in the right manner by increasing your initial capital gradually. If you use leverage diligently, then you will significantly increase your profits with time.
Which account size should you choose?
Forex traders are not the same. There are those who are willing to invest big while there are those who are more cautious and prefer to invest small amount of money. Investing large capital outlay has is riskier but has its own set of benefits. Below is list of account size to choose from.
- No capital investment (€0)
These accounts are meant for traders who have no initial capital to invest in forex trading. Some brokers offer forex no deposit bonus and free demo accounts that traders with no capital can use to fine tune their trading skills.
- Small investment (€100-250)
Many novices usually fall under this category. It is a perfect account for traders to want to build their profits gradually.
- Medium investment (€1000-5000)
Most speculators fall under this category. When a trader choose to invest under this category, he/she can make good money without taking too much risk. Most of these traders use various trading techniques such as swing trading and day trading to help boost their profits margin.
- High investment (above €50000)
Every forex broker desire to attract such traders. Most trading platforms usually offer exclusive trading tools to such traders. The trader chances of making huge profits is also high.
In conclusion, the amount of money to invest in forex business should depend on how well you can leverage. Whether you choose to start from zero, medium or high, the most important thing is the strategy that you use because it will determine if you will make profits or loses.