The forex market is the most accessible financial market in the world. To trade on a financial market, you need capital. In order to start trading currencies, you need to invest a certain sum of money with your broker which is then used to buy and sell currencies. The amount you have invested in trading has a direct impact on the amount of profits you can make, as larger trading accounts can open larger position sizes than smaller trading accounts.

If you want to become a Forex trader and are wondering how much money you should spend on trading, you have come to the right place.  In this article, we explain what is the minimal amount of money you require to trade currencies and the factors which you need to check before starting.

It’s for everyone

Let’s consider the Forex market for a moment. Much is made of the vast size of the FX market, but its egalitarian accessibility is often overlooked. Small players happily play alongside the largest participants. There is a place at the table for everyone because of the surprisingly low barriers to entry. High levels of leverage allow small deposits to command sizable positions.

In short, this means you can make trades without tying up a lot of your cash. Obviously, you should never trade beyond your means, but leverage offers a very convenient way of trading.

From Where to start

There are a dizzying array of questions and variables to consider when you begin trading. Will you be a fundamental or a technical trader? Or perhaps, a combination of both? Also, will you trade short term or long term? Will you trade rigidly based on the rules of a particular Forex system? Will you take a more discretionary approach? The questions are endless, but ultimately they determine what you achieve in the market, and how you do it. But you can also break them down into even more specific directions.

First of all, how much money do you need to trade Forex? Also, how large should you make each trade? The answer may be smaller than you think – it’s actually zero. A Demo trading account allows you to experience the live Forex markets without risking any money, by enabling you to trade with virtual currency. Winstone Prime offers clients the ability to trade virtual funds as per their need in their Forex demo account.

This also applies if you want to start using an expert trading platform such as MetaTrader 4 & Metatrader 5 platform. By mixing usage of a demo account and a live account, you can test your strategies within a risk free environment first, before you move onto the live markets. If you are a novice, a demo account is the ideal way to dip your toes in the water.

After all, part of learning is making mistakes – but you don’t have to lose capital by doing so. Another important thing to consider when you start trading is how to implement risk management into your trading. Doing so will enable you to manage the risks effectively, so you’re aware of them, and you know how to reduce the level of risks you face.

For the beginner

As a beginner, you are going to make a lot of mistakes and you are learning at the same time. So, starting your trading career with a large fund is not a good idea. This is because the lessons you will learn in the early stages of your forex career in relation to setting up trades, entering, closing and profiting or losing are not dictated by your starting balance. You can simply trade smaller lots and still have the same educational outcome whatever the end result.

Most forex traders lose a few accounts at their early stage, and that is very natural. You will learn to respect the market and learn to be disciplined in a hard way. But you should also preserve your capital for the future when you are going to be more mature as a forex trader. It could take as long as you are practicing in it to become a mature and successful forex trader. You can make consistency profit between 1-2 years if you have the right forex education and practice hard enough.

How much to start with Forex?

So, how much money do you need to trade Forex? The minimum amount needed to trade Forex depends on a variety of factors, such as your trading style, available funds, average Stop Loss level, required minimum deposit for your broker, level of experience, and so on.

In any case, you should never invest more than you’re comfortable losing. Trading financial markets involves a high risk of losing your funds, and you don’t want to invest your entire life savings into trading.

Your trading style also plays an important role in determining your Forex starting capital. In essence, scalping requires a significantly smaller initial cash outlay than swing or position trading. The reason for this is the relatively small size of Stop Loss levels in scalping, which combined with leverage allows you to maintain enough free margin even when a trade goes against you. Day trading, swing trading, and position trading, on the other hand, require substantially larger Stop Loss levels which could be hard to maintain with a small trading account. Avoiding a margin call and maintaining enough free margin is always easier with a larger account size.

Finally, experience is also a crucial factor that influences the size of your starting capital. If you’re a beginner, you could start with as low as $200 to get a feeling for the market when trading with real money. On the other hand, if you’re consistently profitable and have years of trading experience, you can afford to invest as much as you’re comfortable with.

Pros and cons of trading with small capital

When discussing how much money you need to start Forex trading, we are including the pros and cons of trading with a small trading account balance. The truth is that many traders are not able to afford a large account, either because of a lack of funds or insufficient trading experience. So, here are some pros and cons of having small account sizes.

1) You need to keep an eye on your free margin – If you’re trading on relatively high leverage, chances are that you will quickly deplete your free margin. When this happens, you’ll receive a margin call from your broker and all your open positions will be automatically closed at the current market rates. Make sure that you always have enough free margin to withstand negative price fluctuations.

2) To make a considerable profit, you need to increase your risk-per-trade – This can lead to an accumulation of losses which could eat up a large portion of your trading account.

3) Small account sizes limit the number of open trades – This point refers to the first point which talks about free margin. Each trade opened on leverage will decrease the amount of your free margin, and a small account size simply can’t handle a portfolio of trades.

4) Small accounts are a great way to learn proper risk management and acquire a disciplined approach to trading – If you learn the basics of risk and money management on a $500 account, you can apply the same principles to a $5,000 one – there’s no difference at all.

Is It Worth to trade with Minimum Deposit?

A final issue to consider is, even if you can trade Forex safely with a small amount of money such as $200, is it really worth it? It all depends how much these sums of money mean to you and how much time and effort you are going to put into trading Forex.

Nobody should ever trade Forex with money they cannot afford to lose, but you probably won’t stay motivated for long if you trade with an amount of money which is so small and trivial to you that you don’t feel like you care much about the result. You need to find a balance which works for your trading style, your emotional style, and your financial situation.

Final Thoughts

It doesn’t actually matter how much money you have — you can start trading on Forex. 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. If you’re willing to grow your account slowly, then you can likely begin with as little as $200, but starting with at least a $1000 is recommended no matter what style of trading you do.

Actually, there is no right answer for that. It could be $200 or $1,000,000. A handsome trading capital is very important for a trader.  You should only risk the amount in a trade that you can afford to lose willingly, it means the amount which is not going to cause you any financial hardship at home. Trading offers great opportunities to profit, but it’s risky and losses are possible. Here is your best place to start trading. Winstone Prime offers all account types, reliable analytics, and provide support for your trading.

Wish you all the best for your journey to become a successful forex trader.