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Why Account Size Matters in Forex
Written by: PaxForex analytics dept - Friday, 14 July 2017 0 comments
Thankfully the (foreign exchange) forex market is the most accessible financial market, only requiring a small amount of capital to open an account. Unlike the stock market, there is no legal minimum you need to start trading forex. Research shows that the amount of capital in your trading account can affect your profitability. How much money you will 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. 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.
A bigger account size means an upgraded status with the broker. Spreads can be tighter, meaning you earn a bit more and lose a bit less in every trade. This is an obvious advantage but definitely not the most important one. In some cases, a bigger account means a better customer
service with the broker and perhaps other perks. Brokers may offer you enhanced mobile services for example.With more money in the account, it is easier to implement money management principles.
If you’re serious about forex trading it is good to have some specific goals written down. One such goal is how much money you make from your trading activities. What is a reasonable return is strongly impacted by the size of your forex trading account. It’s not reasonable to expect to make $1 million from a $10k trading account in a short space of time, unless you were taking very large risks that may wipe out your entire account. If you have a specific monetary goal in mind you may want to analyze what size forex trading account to use to have a reasonable expectation of achieving your goals.
In conclusion, account size in forex trading matters a lot. A legitimate question now would be “how big my account has to be”.The right amount of money that you have to deposit in your account depends on the reasons why you started this in the first place. Someone who wants to make the trading his main income source, will definitely have to deposit far more money than someone who is trading a few times a week looking at the trading in the forex market as a tool to bring value to his savings.