Forex trading can make you lots of money. But you need money to start forex trading in the first place, which is a barrier to many potential traders.
So, how much do you realistically need to start trading on the forex market? Can you start with a tiny capital, and turn it into something huge?
The wrong questions
Any good trader knows that these are not the questions you should be asking when considering forex trading. What you really need to ask is the following:
- What are your reasons for trading? Do you want it to be your primary income?
- What are the investment limitations imposed by your forex broker?
- How much can you afford to invest in your trading?
- What sort of risks are you willing to take?
- Could using the best forex apps uk help you start trading successfully?
Once you’ve answered these questions, you’ll know if it’s the right time to start trading. If you can’t answer these questions, you aren’t ready to start trading, regardless of how much capital you’ve got.
Why are you trading?
This is the first question you need to ask yourself, and you have to be brutally honest. If the answer is because you’re looking for a quick fix, admit it, and determine whether that’s the only reason.
Ultimately, you need to decide on a goal. Only once you know where you’re going, can you know if you’ve got what it takes to get there. If you intend on becoming a full time trader, you’ll need to determine whether you are willing to make the sacrifices in time and money to get there. If you’re looking for a secondary income, you’ll need to ask whether you have the discipline not to get over invested. Every intention comes with its own questions.
What does your broker require?
Asking how much you need to open an account is not the same as asking how much you need to start trading. The answer depends on your broker, who wants you to invest as much as possible. For this reason, some brokers ask for relatively high initial deposits. But there are others who require zero deposits, instead requiring you to sign up for a lifetime account.
This is where the financial reality can come crashing down on you. You need to determine whether you have disposable income to stake on forex trading. In other words, will you be trading with money you need for day-to-day living? If the answer is yes, then you should put down the handbook and come back when you can answer in the negative.
Not having what is called “risk capital” – money you can afford to risk – is not just going to cause you financial hardship at home. It will also cause you to fail as a trader.
One reason, is because as a beginner, your trading is more about getting experience. All beginners will probably fail at first.
But even advanced traders can be felled by not having risk capital. Anyone who knows about trading psychology, will tell you that staking money you need on forex or any other trading will cause you to make bad decisions. If your trades are not doing what you feel they need to be doing, you’ll panic and make bad decisions.
Evaluate your money according to your risk taking and expectations
Deciding whether you have enough to start trading ultimately ends with looking at what you expect from the market, and what sort of risks you’re willing to take. If you’re looking for fast gains, but have minimal capital and are by nature cautious, you’re probably not going to attain your goals.
When asking the question of how much you need to trade forex, you should pause and think about the above factors first. That should lead to your own decision as to whether you have what it takes.