Does the amount of money we use as a deposit has any influence on our prospect of becoming a profitable trader? This article will answer the question.
There are traders who earn 10% profit a month, others who earn less than that, and many others who earn more. This brought up a question of whether the amount of money we used as capital has any impact on our profit. I think this article could answer this question for all traders, especially for new learners.
As for me, it doesn't matter how much money you use to trade forex, as long as it is sufficient for trading and you are able to make enough profit. But if you want to make more, such as buying a car or a house, then there is a question of how much more funds you should use.
Instead Of Big Funds...
It is quite difficult to just say, use big funds. It raises the next question, How big? Say, 50 thousand? what if our salary is not that much, and we are going to need years of saving to get that much? Lucky you, that's just an example. What I really want to say is, you don't really need more funds; there are two ways you could choose besides getting more funds.
1. Small Fund, Big Profit
This method is a little bit extreme. It's usually used by professional traders that's been involved in trading for a long time. To do this, you have to take more risk, because huge profit always has bigger loss potential too.
For beginners, big profits commonly reached by playing near MC (Margin Call). The risk is definitely high, but at least if you succeed, there is the satisfaction of earning a fantastic profit. But this method won't survive long. Even if you could get profit now, tomorrow the account could get MC.
2. Trading Consistently
A less risky method is through consistent profit. Just try trading with small funds first. When you are able to make a consistent profit, then add more funds. Although you may get less profit than the risk-takers above, believe that consistency will produce a big profit in the long run.
So, which one do you choose? Beginners usually want to get a big profit quickly, but more experienced ones want consistent small profit. The point is, how much fund you used to trade does not ensure profit, your trading strategy and psychology does.
The funds you use has to be proportional to the profit you generate. Make sure you can run your trading smoothly from time to time. When you are able to run consistently, you will be proud of yourself. It is surely better than getting a big profit now, then getting an MC tomorrow.
Although you are free to choose the number of funds in your trading account, the strategy you could arrange to maximize its use is different. Someone who wants to try forex trading with zero deposit could choose one of two paths: participate in a demo trading competition or choose brokers that offer no deposit bonus. Demo trading competition often held by forex brokers with non-withdrawable funds to the range of hundreds and thousands of dollars.
If you take this option, you could freely choose your strategy because the amount of virtual money in demo trading numbered in thousands of dollars. But if you choose the no deposit bonus, then be aware that such a bonus usually ranges on 5-10 USD, and you would be hard-pressed to choose a trading strategy with such a minimum amount.
The commonly acceptable funds to start forex trading is 100-500 USD, with which you could trade relatively comfortably by utilizing the scalping method. If you want to try your hand at day trading, though, it is best to put in larger funds, about 500-1000 USD. That way, you could gain more by opening fewer positions and taking less risk. With similar reasoning, the long-term trader would need 1000 USD or more to actually gain significant profit.
This does not mean that if you only own 100 USD then you can not day trading; because, of course, you can. It is just that in order to grow your funds optimally, you should choose the most suitable strategy in accordance with the number of funds you have. Remember: the funds you use has to be proportional to the profit you generate and ensure that you can run your trades smoothly from time to time.