Forex Investment: How Much To Get Started?
This was the million dollar question I had to ask myself the first time I opened my first live trading account. Many traders will give you different answers and the brokers encourage the fact that you can start from as little as a $100, so the question is: who do you listen to? Here is a hint that will be helpful when that time finally comes knocking at your door to trade with real money. The hint is you must abide by the most important rule of Forex investment, invest only what you can afford to lose… Currency trading is a risky business where the potential of making and losing money are magnified. You will come across a lot of brokers and websites, which heavily encourage you to trade with high leverage to increase your profit quicker. Though, it is highly beneficial, it does have one big disadvantage…the risk of losing all your money.
So how much do professional traders invest? A professional trader will trade: • 1 standard lot for every $100,000 in their account Why? They understand the amount of risk that must be taken in relation to the account size being traded. I do believe that this insight on how the pros trade will help you see the bigger picture. Opening an account will mainly depend on the amount of risk you can afford to take. You might want to get familiar with margin and leverage as not having a full understanding of those terms may blow your account up. I bet you don’t want to see that happen, not now and nor in the near future. We won’t go in much detail concerning leverage and margin, as it might be too much information to take in, so I thought that breaking those two sections in two different posts might help you understand better. Now, let’s look at the amount of money that you need for Forex investment. It’s no secret by now that the more money you have to invest the less risk you will take onto your account whereas the less money you have the more risk you will be exposed to. This is mainly where leverage (ratio between the lending capital and invested capital) comes into play. • High leverage suitable for traders with large accounts preferably 100k+ (standard account) I would highly recommend trading with a leverage of 1:1 or 10:1. Trade with a low leverage whatever the amount you will be thinking of investing. This will minimize risk on your account until you are confident enough to increase your leverage. Now for the bombshell! Do not expect to get rich overnight and if you think you will be making return on investment of 100% per week starting with an amount of $2000, then you better stop dreaming. Making 200 pips per week, which equals $2000 for a standard lot, though possible, is not realistic for an account of $2000. The risk is way too high and not suitable for such a small account It is in your interest to not be fooled by those brokers providing high leverage for a small account of a $1000. Please remember that they are out to make money and not to help you make money. Only risk 3% of your account on each trade you take. This helps you manage your money properly and be exposed to less stress.
So let’s recap the main points: • Invest only what you can afford to lose
Remember your goal is to be profitable not a millionaire overnight. So be patient, minimize your risk, learn how it feels to have your money on the line and be in control of your emotions. When you start being profitable and when your account slowly starts to grow then you might want to think of the next step to take in increasing the size of your forex investment capital, until then risk management is the cure to a successful trader. Happy Trading, Top of: Forex Investment Page Back to: Learn Forex Trading Page Back to: Forex Trading Domain Homepage
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