If you are about to become a Forex trader, you are probably wondering how much money to invest at the beginning. In this article, we tackle the minimum amount of money you will need to Trading Forex currencies.
First of all, remember that there are demo accounts that allow you to practice without having to invest a single dollar. The demo enables a newbie to practice opening orders and setting position sizes.
The initial amount of money depends on the type of account
If you are ready to trade using a real account and earn real money, be aware that the amount of money required to start trading depends on the type of account, you choose. For example, to Trading Forex on a micro account, you will need to deposit at least $ 5. You will be able to open orders whose volume starts from 0.01 lots with decent leverage.
Consider a standard account with a floating spread of 0.5 pip. This type of account requires a minimum investment of $ 100. Note that you can open an account of each type. Also, keep in mind that trading with leverage makes it easier if you plan to open multiple Trading Forex.
To be allowed to open up to 10 accounts of any type, you must pass through a confirmation process from email to SMS and ensure that the total deposit on all accounts in your personal space is of $ 100 or more.
Your deposit determines the size of your trade
The minimum trade size with many brokers is 0.01 lot. A lot represents a standard contract size in the currency market. It corresponds to 100,000 units of a base currency. Therefore, 0.01 lot counts as 1,000 units of the base currency. If you buy 0.01 lot for the EUR / USD pair and your leverage is 1: 1000, you will need $ 1 as margin for the trade. If you deposited $ 5 in a micro account, your deposit would cover this margin, and you can open four more trades of this size. Each pip of price movement will bring or cost you $ 0.1.
Look at some of the options for beginner traders. The examples we will discuss here are sound from a risk management point of view.
Starting with $ 100 deposit
The level of risk for a single Trading Forex should be less than 5%, regardless of your deposit size. Let’s start with a risk of 3% ($ 3). If you trade lots of 0.01, you can have a Stop Loss of up to 30 pips. It’s more than sufficient for an intraday position (open and closed on the same day). The recommended risk/reward ratio is ⅓. The potential profit from this trade will therefore be 90 pips ($ 9).
Starting with $ 500 deposit
What if your deposit is $ 500? With a risk of 3% ($ 15), your trade size can reach 0.15, and each pip of profit/loss will amount to $ 1.5. With a larger position size, you can earn money at a faster pace! There will be 10 points when using the stop-loss order. If you need a larger Stop you can trade 0.1 lot: each pip will cost $ 1. The stop loss will be 15 points. With a 5% risk ($ 25), you can authorize an SL of 25 pip. The profit in this case (if your profit is three times as much) will be $ 75.
Starting with $ 1000 deposit
If your deposit is $ 1000, you can, of course, open even larger trades. A 3% risk for a trade ($ 30) and a leverage of 1: 1000 will allow you to trade 0.3 lots. A 10% risk ($ 100) will allow you to trade 1 lot. In this case, a profit of $ 30 will represent a gain of $ 300. The optimal risk of a $ 30 trade will allow you to trade 0.1 lot with the SL of 30 pips. The potential payout will be $ 90.
Another important thing: remember the Margin Calls and Stop Outs. The margin call is an allowable margin level of 40% and less. The brokerage company is entitled to close all open positions of a client due to the lack of free margin. A stop out is a minimum allowable level of margin (20% and below). The Trading Forex program will begin to close open client positions one by one to avoid further losses resulting in a negative balance (less than $ 0 ).
If you follow risk management rules and don’t put your entire deposit in a trade at once, you will be safe from margin calls.
As you can see, you need at least $ 5 to start Trading Forex. The rest is up to you! Estimate your knowledge and experience, and think about your goals as well. How much money do you want to earn? How often will you trade? The larger the deposit, the larger the positions, the more you will earn from a trade.
Trading Forex offers huge opportunities for profit, but it is also risky, and losses are possible. Make sure you only spend dedicated only to Forex trading and not the money that covers your basic needs.