Minimum Capital Needed to Trade?

dnaj65000 · Jun 1, 2006

A suggestion...

Everyone new seems to start with stocks. I know I did and although it's valuable, jump ahead of the learning curve and go with FX. $2k acct at 5x leverage (which is conservative in FX) makes you trade a mini-lot worth 10k.

Each pip the EUR/USD moves = $1. So a 100 pip or 1 cent move is $100.

Realistically, after a bit of learning, you should be able to get about 200 pips a month. That's $200 off of a $2000 account or 10% ROI for 1 month.

Get profitable, then size up. You'll never have to worry about volume because the FX market is infinitely more liquid than stocks. No commiss, just the spread, but hey, if you're retail, you're paying the spread on stocks anyways. And no company news or earnings to worry about. No Pattern Daytrading Rule, no Nasdaq Level II, no Specialist, no CNBC, no SEC fee, no ECN fees, no data feed fees, no noise, no fuss...Cash is King...trading is pure. You're dealing with a country's currency. USD, EUR, JPY, GBP, CAD, CHF, AUD. Just study about 7 major currencies instead of 50 stocks in 5 different sectors, less information overload.

Best of luck to you.

cashmoney69 · Jun 1, 2006

Quote from dnaj65000:

A suggestion...

Each pip the EUR/USD moves = $1. So a 100 pip or 1 cent move is $100.

Realistically, after a bit of learning, you should be able to get about 200 pips a month. That's $200 off of a $2000 account or 10% ROI for 1 month.

yea, but how often is it that a currency will move one whole cent?..usually its like 1/100th of a cent or some really really small number. Thats like saying, "Well if the stock goes up a dollar". normally thats not the case. In stocks you make more money, thats why there is more attention to stocks.

- nathan

dnaj65000 · Jun 2, 2006

Quote from cashmoney69:

yea, but how often is it that a currency will move one whole cent?..usually its like 1/100th of a cent or some really really small number. Thats like saying, "Well if the stock goes up a dollar". normally thats not the case. In stocks you make more money, thats why there is more attention to stocks.

- nathan

Take a read of Market Wizards noob. You'll expand your knowledge of a world outside of equities. In terms of size, the equites market (stocks) is the smallest, the debt market (bonds) is bigger, and the cash market (FX) is the largest.
How often does it move 1 cent? The simple answer is a lot. I'll link a site that will show the past 15 calendar days of the EURUSD on 1hr bars. You'll see multiple moves from 1.2730 to 1.2880. That's 1.5 cents or 150 pips. You can change it to 2hr bars to see 30 calendar days. You can be the judge yourself, but like I said, a conservative estimate is 200 pips.
http://www.dailyfx.com/charts/Chart.html

Johnny Walker · Jun 2, 2006

Open a commodities account with a broker that offers tons of different trading products. You can easily start with 2500 dollars and make a couple mistakes on the way. There are a lot of low margin products that deal with international markets. You should get used to holding over night, day trading is a losers game in the long run. I started my trading career in the rice pit at the cbot.

OldTrader · Jun 2, 2006

If all I had to trade with was $5K, I would quit. It's not enough to trade stocks in my opinion. There is no prerequisite that you start with a small amount of money to "lose it" to learn something. Better to put your $5K in the bank, and save some more.

I think the best amount to start is in excess of $25K, because you can then do some day trading.

If not, you at least need to exceed $10K so that you can short. Some places require $10K equity to short stocks.

I'd open your account at a place like Interactive Brokers, where your commission can be $1 each way. And I would concentrate on swing trading, which in the end will be more lucrative in my opinion than day trading.

Good luck.

OldTrader

regulajo · Jun 2, 2006

Thanks to all who responded.

I have more like $16,000 to trade with and will have to have tight stops and trade carefully, although not scared.
I am trading retail, so until I build it up past the minimum $25, 000 I will be be going slow, and learning more.

Once I am trading steadily, I will post in the journal, albeit good or bad days.

Good trading to all,
Regulajo

jaronimo · Jun 2, 2006

Quote from regulajo:

Thanks to all who responded.

I have more like $16,000 to trade with and will have to have tight stops and trade carefully, although not scared.
I am trading retail, so until I build it up past the minimum $25, 000 I will be be going slow, and learning more.

Once I am trading steadily, I will post in the journal, albeit good or bad days.

Good trading to all,
Regulajo

Be careful, tight stops can end up kicking your butt. You gotta give the trade some room to move around unless you are really good at picking direction. With the tight stops, many trades are stopped out that if the stop had a little more room to breathe it would have been a successful trade. But then again, it depends on how you trade.

If you go the forex route, you can even open an account with as little as $300. Thats not a bad way to learn because unlike futures you can throttle up your trade amount. Trade small, so you are only risking a few percentage points on each trade. Forget about the dollar value, only focus on the percentage points. If you do that and are successful, you can then ratchet up the amount you trade with, meaning add the rest of your money to that $300 account, now its $16,000 and you continue to trade the exact same way, using percentages.

FaderTrader · Jun 2, 2006

Quote from dnaj65000:

You'll never have to worry about volume because the FX market is infinitely more liquid than stocks. No commiss, just the spread, but hey, if you're retail, you're paying the spread on stocks anyways. And no company news or earnings to worry about. No Pattern Daytrading Rule, no Nasdaq Level II, no Specialist, no CNBC, no SEC fee, no ECN fees, no data feed fees, no noise, no fuss...Cash is King...trading is pure. You're dealing with a country's currency. USD, EUR, JPY, GBP, CAD, CHF, AUD. Just study about 7 major currencies instead of 50 stocks in 5 different sectors, less information overload.

Best of luck to you.

Yup - and no order flow or daily Open. No visibility.

murray t turtle · Jun 2, 2006

Quote from OldTrader:

If all I had to trade with was $5K, I would quit. It's not enough to trade stocks in my opinion. There is no prerequisite that you start with a small amount of money to "lose it" to learn something. Better to put your $5K in the bank, and save some more.

I think the best amount to start is in excess of $25K, because you can then do some day trading.

If not, you at least need to exceed $10K so that you can short. Some places require $10K equity to short stocks.

I'd open your account at a place like Interactive Brokers, where your commission can be $1 each way. And I would concentrate on swing trading, which in the end will be more lucrative in my opinion than day trading.

OldTrader

=======================================
RE;Reread

Mr & MRS RegJoe;
You can start out with 5 k or less ,Read /reread Rich Dennis & William o Neil in Jack Schwager books.Reread again .
Agree with OldTrader, IB is a a fine but complex broker

Quite frankly however whike 5 k is enough to start;
TRAD[Trade station] ads says 50 k is best for active trading,probably because as Wiliam o Neill compares sucessful trading [NOt FX, but stocks] ,to a medical DR education, in time & money.

Best to learn on non leveraged stocks, swing trading;
maybe graduate to daytrading derivatives, glad i didnt start daytrading derivatives., too many drawdowns.

Wisdom is profitable to direct.