Thursday, December 2, 2021

Should I Trade Forex and How Much Should I Begin With?

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Ruey L.
Full time trader, part time poker player.

Should I Trade Forex and How Much Should I Begin with?

Before the internet, only big financial institutions and individuals with deep pockets had access to the forex market as the capital requirement was high. However, with the development of the internet and the emergence of retail forex brokers, common folks like you and I are granted the opportunity to participate in the [largest financial market in the world]. 

Now here comes a problem. Not everyone who aspires to be a trader has a huge sum of capital at their disposal. A fresh college graduate wants to start trading forex, but he only has a few hundred dollars in savings. Should he invest all his savings into his trading account? A wealthy businessman wants to venture into forex trading, how much should he use as his initial trading capital?

There are a few factors to be considered when deciding the amount to invest in forex trading. 

Financial Situation

First, assess your financial situation. If you are facing financial difficulty and paying for necessities is an issue, do not trade forex. Those who look for quick money through forex trading will eventually find themselves in a worse situation than where they began. Otherwise, anyone is highly encouraged to go ahead and explore the possibilities that forex trading offers.

Trading Experience

The second factor would be your trading experience in the financial markets. For a complete newbie, it is not recommended to make deposits into a trading account right after discovering forex trading. A toddler can’t run before he can learn how to walk. The best thing novices can do is to learn the trading fundamentals and build a solid foundation for themselves through [demo trading].  After acquiring a decent level of trading skills and developing strong self-discipline, you can then advance to a [live account] and start with a small amount of capital where it does not affect your financial well-being. On the other hand, if you are considerably experienced in the financial markets and know what you are doing, then you should know how much capital is optimal for you to begin trading forex with.

If you decide to start trading with a small capital, here is what you should do: Trade with a legitimate and reliable broker who does not trade against you. Do your own research on STP broker and market-making brokers. Before you go, here is something for you to ponder upon. Why would a broker offer a deposit bonus for small accounts? 

In short, can one begin trading with small capital? The answer is an unequivocal yes. It does not matter how big or small one’s trading account is, if one has yet to achieve consistency in trading, the eventual outcome will always be unfavourable. On the flip side, consistent traders can generate superior returns over time through [compounding], even if they begin trading with small capital.

Click here to learn about the 5 things you should do to build consistency in trading

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