The forex market has to be one of the best market to invest, given the high levels of liquidity always on offer. While some people launch their investment career in the liquid market with thousands of dollars, others start with as little as $100 or $50. So it begs the question, how much money do you need to start forex trading?
When it comes to forex trading, there is no definitive’ answer; on the right amount of money, one needs to start trading currency pairs. Different accounts, as well as brokers, come with different requirements. The fact that not all traders are alike also means there will always be a disparity in the right amount to invest in the forex market.
Below are some of the factors to consider in determining the amount of money to invest in the Forex Market
The amount of money you invest in the forex market should come down to two things: are you looking to grow your account, or are you looking to generate regular income from the market? For those looking to grow an account, then starting with at least $2,000 would be the way to go. In this case, you will be able to risk 1% on each trade or $20 and end up earning $40 on taking two trades a day.
Likewise, if you are looking to generate income from trading the forex market, then starting with as much $5000 could allow you to take out large positions and gain as much as $1 per pip. In this case, you would be able to make as much as $75 on gaining as much as 15 pips.
Read More: What is a Pip in Forex: Guide
Similarly, it is possible to start an account with less than $500. In this case, you will have to trade smaller positions and allow the account to grow for at least one year before withdrawing any money. If you do this for one year and do not risk more than 1% on each trade, you will grow your account by making $10 a day.
Risk management is another important factor to consider when considering the amount of money to invest in the forex market. How good you are at controlling risks will determine a great deal the number as well as the sizes of trades you take.
As a rule thumb, it is important not to risk more than 1% on a single trade. If your account has less than $1000, then you should not risk more than $10 on any given trade. Similarly, if your account has $2000, you should cap losses at $20.
It is important to know that even the most successful traders have strings of losses. Therefore taking the lowest amount of loss on each trade is a sure way of growing a trading account.
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