One of the first questions Forex amateurs ask is what is the minimum amount to start Forex trading? Today, we look into this matter together with AtoZ Approved FCA authorized Forex Broker HYCM .
HYCM - There are many opportunities in the foreign exchange markets to make money. This is illustrated by the growing popularity of Forex trading in recent years. One of the first questions posed by novice traders is what is the minimum amount to start Forex trading.
Before venturing into the world of trading, FCA and CySEC regulated broker, HYCM, recommends looking into the level of financial commitment required. Moreover, it is vital to learn about why it’s important to ensure you have sufficient disposable income.
What is the minimum amount to start Forex trading?
The internet age has made Forex trading accessible to everyone. Pretty much everyone has an easy access to global brokers trading platforms offering services. Many platforms provide opportunities to earn attractive rewards. It should come as no surprise that the amount of capital you have at your disposal will influence your ability to generate income from trading.
Many Forex traders earn good returns on their investments. Yet, in order to start trading Forex in the first place, you do actually need to have a certain amount of money. This may be an obstacle to some potential traders.
There are other important factors that also you should look into such as which broker and trading platform to choose. However, but what is the minimum amount to start Forex trading is an important question. This is also one of the key factors in determining your ultimate success.
Before setting out, it is a good idea to consider 2 important issues to decide if you have what it takes.
Check Broker’s Minimum Deposit
The minimum deposit required to open a trading account is not the same as the amount of capital you need to start trading. Minimum deposit amounts depend on the broker. As a search on the internet will reveal, some will request relatively high initial first-time deposits while others require a lower deposit. A typical first-time deposit with a reputable broker such as HYCM is $100.
Assess Your Finances
As a new trader, you need to establish whether you have sufficient disposable income to invest in Forex trading. Not having enough risk capital may cause financial difficulties and could abruptly end your trading activities. This is something that inexperienced beginners should be aware of.
Even more experienced traders know that having insufficient risk capital and staking money you need on Forex is a recipe for a financial disaster. If your trades are not going in the desired direction, you’re more likely to panic and make the wrong decisions.
Deciding whether you have enough capital to start trading requires an assessment of your expectations from the market. It also requires the evaluation of the level of risk you are prepared to take. If you are looking for quick gains but have a limited amount of capital and are naturally cautious you are less likely to achieve your goals.
With these factors in mind, we can now take a closer look at what is the minimum amount to start Forex trading.
Get Set To Trade
One of the questions asked by most novice traders is whether it makes a difference if you open an account with $100 or $1,000. Indeed, it does. Traders who start with $100 are not likely to have much of an income stream. Additionally, some traders do not have the patience to allow their account to grow. They end up risking too much of their capital on each trade while trying to earn an income. These traders are likely to end up losing everything.
How much to risk in Forex trading?
Many Forex experts advise never risking more than 1% of your capital on a single trade.
So, if you only have $100 in your account, you should only risk $1 per trade. This equates to taking a one micro lot position. This implies that each pip movement is worth approximately 10 cents. By trading in this way, it is possible to average around $2 profit a day.
While this will build an account slowly, it is preferable to risking $20 per trade or more to turn the initial $100 into thousands as quickly as possible. This may work for a time, but experience shows that this strategy will most likely result in a zero account balance.
Nevertheless, trading Forex with a very small amount of money offers almost no flexibility in the style of trading. If you deposit $100 and follow correct risk management protocols, you can only risk 10 pips if you take a 1 micro lot position. This effectively means you have to be an active day trader.
With a 10 pip stop, there is little chance you can swing trade. It also is less like that you invest as you’ll easily be stopped out should you try to hold out for long-term gains. Hence, it is preferable to invest more money into a Forex account to allow you to trade more productively.
If you are ready to grow your account slowly, you can start with as little as $500. Yet, it is probably worth considering starting with at least a $1,000. In fact, some seasoned traders recommend at least $3,000 for day trading.
With a $3,000 account and risking no more than 1% of your account on each trade i.e. $30, it is possible to make in excess of $70 per day. Where the aim is to capture longer term moves, you may wish to consider starting out with $5,000. This would make you about $100 to $120 per week, which is more of an income stream.
Final word
Your personal trading style will ultimately determine your income potential. However, in terms of what is the minimum amount to start Forex trading, it is very much a case of what you put in, you get out. Hence, the amount you wish to invest will play a significant part in your ability to achieve your financial goals.
About HYCM
HYCM is a leading provider of online FX and CFD trading services to retail and institutional investors. HYCM has a 40-year operational history. It is focusing on client satisfaction and technological advancement. HYCM has become the online broker of choice for investors across the globe.
HYCM is part of the Henyep Group, an international conglomerate with businesses in financial services, property, education, and charity. It is providing access to a range of asset classes including currencies, commodities, metals, shares, and indices.Moreover, HYCM is represented globally with offices in United Kingdom, Hong Kong, Cyprus and Dubai. The company has passed AtoZ Forex approval test and is one of the few AtoZForex approved Forex brokers.