What Is the Minimum Cash to Start Trading?

Day trading forex can be quite a lucrative way to spend your spare time. It can be made into a full-time business, but usually only after beginning modestly by using extra hours in the day. Once you’ve gained experience and understand how to make money at forex, then you can consider quitting your regular job. The beauty of forex trading is that you can start small. I mean, very, very small. It is the largest and the most accessible financial market, and you can work from anywhere in the world. Unlike other markets where you need thousands to get a good start, forex traders can begin trading with only a few hundred dollars in their account. It is not suggested to start with the minimum amount, but it is possible. Most recommendations for a minimum amount would not be less than $500. 

 

Requirements for Trading Forex

The rule of thumb is that as a day trader, you should never put more than one percent of your trading account at risk on any single trade. You need to take this into account when setting up your beginning trading account. With a $500 beginning account, you could risk a maximum of $5 on each trade. If you begin with $1,000, that means you would only want to put $10 of it at risk on a single trade. If you put in a larger amount, like $5,000, you could wager $50 on each trade. That is a big difference. The thing you don’t want to do is enter a trade with more than 1% and possibly lose it. You can stand to lose 1% without killing your cash. Remember that the longer you keep money in your account, the more time you can spend making trades. 

 

Trading Forex Pairs

Forex trades are done in pairs of 1,000, 10,000 and 100,000 units. These are referred to as micro, mini or standard lots. For newcomers to forex, it’s best to begin by opening a micro lot account. You will have the most flexibility with a micro account, and the risk is still less than 1% of the total account for every single trade. As a micro trader, you could, for instance, buy currency lots of $6,000 or even $14,000. If you were working with a mini account, you would only be able to make trades in lots of $10,000, $20,000 etc. Standard lots are even less flexible, requiring positions of $100,000 or $200,000 and up. Watch the USD charts and notice what happens when US currencies are listed in a pair. If it is the second currency to be listed in the pair, there is a fixed value of the pip. So let’s say you have opened your micro lot account with $1,000. That would make the movement of each pip worth 10 cents. As you go up the ladder with lot sizes, the value of the pip moves is greater. There are different values for varying pips, depending on the currency pair and the price. In order to determine your position size and risk, you need to understand the value of the pair you are trading. 

 

Day Trading Minimums

If you want to trade in securities, the amount of money is different than forex. Stocks typically trade in lots of at least 100 shares. To purchase 60 or 70 shares, you would need $6,000 – $7,000 available in your account. Trading options and futures are negotiated by contract. There are also commissions to be paid, which can be high if you’re trying to make a minimal investment. 

Jessica Alexander

Jessica Alexander

I've always loved to write, but I'd never want to be famous. So, I write as Jessica A. over here at ADDICTED. You can think of my like Carmen Sandiego, you trust me, but where in the world am I?

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