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How much money do you need to trade forex?
Written by: PaxForex analytics dept - Friday, 11 March 2016 0 comments
The forex market is the most accessible financial market, only requiring a small amount of capital to open an account. How much money you’ll need to trade forex is one of the first issues you have to address if you want to become a forex trader. Which broker you choose, trading platform, or strategy you employ are all important as well, but how much money you start with will be a colossal determinant in your ultimate success. Just because forex brokers only require a small initial deposit doesn't mean that is the recommended minimum though.
Access to leverage accounts, easy access to global brokers and the proliferation of trading systems promising riches are all promoting forex trading for the masses. However, it is important to keep in mind that the amount of capital traders have at their disposal will greatly affect their ability to make a living from trading. In fact, capital's role in trading is so important that even a slight edge can provide great returns.
Not all traders are alike though, and not everyone trades the same way. A day trader may not need the same amount of money to start forex trading as a swing trader does. The amount of money you need to trade forex will also be determined by your goals–are you looking to simply
grow your account, or do you seek regular income from your forex trading. 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.
The position size is essentially the amount of money you put into the market – in other words the amount that you trade. The larger the position size, the more money you will make if the trade wins. However, this also means you can lose more money. This is why using the correct position size is so important, because you can keep within the correct limits of money management and protect your capital from losing trades.
You can start trading with a very small account, but that one has fewer merits than a big account. Evidently, you need big accounts to trade safely and make decent profits. As you trade, you shouldn’t forget to have entry and exit points in mind. Great speculators have an exit target for each of their position, whether the position ends in a positive zone or a negative zone. Then don’t risk too much per trade. Risking less per trade would surely give you good profits as you also have the ability to curtail losses so that they don’t have a big impact on your portfolio.