Determining the amount of money you need to start down the path of trading for a living is a complex process and one for which there are no shortcuts. Contrary to popular belief, you don’t need a lot of money trading forex. You can get started in forex trading in any amount you like. Thankfully the (foreign exchange) forex market is the most accessible financial market, only requiring a small amount of capital to open an account.
Everyone comes to the forex market for a reason, ranging between solely for entertainment to becoming a professional trader. Most professional traders enter into trading opportunities focused on how much capital they stand to lose rather than how much capital they are looking to gain. Nobody knows the future movement of prices so professional traders are confident in their trading approach but conservative in their use of effective leverage.
Since many smaller traders are inexperienced in trading forex, they tend to expose their account to significantly higher levels of effective leverage. As a result, this increase in leverage can magnify losses in their trading account. Emotionally spent, traders then either give up on forex or choose to compound the issue by continuing to trade in relatively high amounts of effective leverage. This becomes a vicious cycle that damages the enthusiasm which attracted the trader to forex.
It is possible to start an account with a smaller amount, such as $500, but if doing so make a commitment to grow the account for at least a year before withdrawing any money. It is important to be realistic about what you expect from your forex trading. How much money you deposit plays a crucial role in how much you will likely make if you follow proper risk management. If you’re willing to grow your account slowly, then you can likely begin with as little as $500, but starting with at least a $1000 is recommended no matter what style of trading you do.
Most traders enter the market undercapitalized, which means they take on excessive risk by not adhering to the 1% rule. Leverage can provide a trader with a way to participate in a otherwise high capital requirement market, yet the 1% rule must still be used in relation to the trader's personal capital. Profits will come as the account grows, and making a living only requires a small edge, but the account must be large enough to provide monetary returns the trader can live off of.
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