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One of the unique advantages of the Forex market is that traders do not need huge amounts of capital. Unlike the stock markets, where traders need to put up huge amounts as collateral and also account for market valuations, the Forex market works differently.

Thanks to leverage and day trading, traders with just an average amount of capital to risk can start trading Forex efficiently. Of course, the success or failure from trading depends on a number of factors. Trading capital is just one of the many variables.

For the most part, in any form of speculation or investing, traders need to have adequate capital. Trading capital ensures that traders have enough capital to allocate for their open positions and also have enough capital in margin for the positions that they are in.

This begs the question as to how much capital is required to start trading. If someone tells you that you need a specific amount to trade Forex, then they are misleading you.

The amount of capital required to trade Forex depends on a lot of factors, such as the expected rate of return, your risk profile, and your trading strategy. Of course, you can trade Forex with , USD, and you can also trade Forex with just 1, USD. But what is the ideal amount to trade?

In this article, we will explore different ways to help you decide on the minimum capital that is required to start trading Forex. Note that this is highly subjective and can differ from one person to another. The answer also depends on a number of factors as touched upon earlier.

Most Forex brokers have a very low minimum requirement when it comes to opening a Forex trading account. On average, you can trade with just USD in starting capital.

In some cases, Forex brokers also allow you to open a micro or a cent account which allows you trade with just 1 USD. However, expecting to grow such an account is impractical.

Risk management and Forex day trading requirements

When it comes to trading, the principles of risk management must be adhered to. This means that traders should follow the rule of thumb and stick to the one percent principle.  

The one percent risk management principle states that traders should not risk more than one percent in their trading at any time. This one percent can be either allocated to one trade or to a series of trades. The bottom line being that no matter whether you have one or multiple positions, the risk should not be more than one percent of your account.

This makes an important point. For example, if your trading capital was just USD, that means you should not risk more than 1 USD per trade. Is that possible? It is, when you trade micro lots. However, trading micro lots can be difficult to trade psychologically.

Trading with just 1 USD in risk can mean that at best you can make 2 USD if you follow the risk reward setup religiously. However, that is not often the case. Traders can grow impatient and eventually make the mistake of risking more than the one percent that they were supposed to.

Thus, from this, we already know that trading with USD and attempting to be successful will take a lot of work and patience, something which many beginners in trading lack and can lead to mistakes that could have been avoided in the first place.

So, does this mean that traders can trade with 1, USD? In this case, your risk once again is limited to 10 USD. While it is manageable, the amount of profits or returns you make is also the same. When you follow the risk reward setup, it means that while you risk one percent, you aim to make two percent returns.

This looks good on paper, but if you crunch the numbers, you will see that in reality you are risking 10 USD and making a profit of 20 USD. For traders who dream about building a bankroll quickly, this can mean having to overcome some psychological barriers.

How much money do I need to start Forex trading?

There is no standard answer to this question. However, traders should focus on how much they expect to make in returns when risking their capital. A good way to start is to look at the risk-free rate of return.

The risk-free rate of return is the interest rate that is gained on an investment when there is no financial risk or loss involved during the period of time.

Typically bonds come into this picture, especially those that are risk free. Of course, the downside to risk free is that the rate of return is very small. In financial markets, the simple concept is that the more you risk, the more rewards you can get. However, traders should not blindly follow this principle but should apply some subjectivity to the matter.

In order to determine the amount of money needed to start trading Forex, the first step is to estimate the expected rate of return on your investment. An average number is around 2% - 5%, with the latter being an optimistic estimate on the returns.

Thus, from this starting point, you can then go into calculating the amount of money you want to invest. However, bear in mind that when you allocate your capital to Forex trading, it needs to be an amount that you can truly risk.

Many traders make the mistake of trading based on their credit card funds or other money, which eventually leads to large financial losses. Therefore, you should never trade with money that you cannot afford to lose. Risk is an important factor in financial market trading.

The next step is to understand the leverage that you want to use. Leverage can help you to magnify your positions. But if not used wisely, leverage can quickly lead to losses as well. Leverage and risk management go hand in hand and this is how you can determine your trading capital.

Focusing on the lot size can also help. Typically, the broker will give you the margin requirements when trading on leverage. Thus, you need to ensure that you have enough funds to account for the margin requirements and have additional funds in your account to account for the market valuation.

Say, for example, if your broker requires 1% of capital for the margin, then this means that you need to allocate not just 1% towards the capital requirements, but you should also have additional funds to cover the risks of the trade.

Capital scenarios for Forex day trading

Traders can also build up various scenarios based on the amount of capital they have. For example, you can follow this simple rule outlined in the table below.

Based on the above, traders can now project the amount of trades they can make, while also accounting for the margin requirements for opening and maintaining a position.

The margin requirements are an essential aspect to help you understand the amount of capital needed to trade. Margin is essentially a good faith deposit. The margin is held in deposit by the broker when the trade is open.

A typical margin requirement could vary from one broker to another. For example, if a margin requirement is 2%, or leverage, it means that traders should have 2% of their capital allocated in the margin account.

Thus, if you go back to the above table, a 2% margin requirement comes to 20 USD. This leaves you with USD as free capital. Thus, when you bring in the 1% risk rule, you can risk just USD and not the entire 10 USD as initially estimated.

Forex day trading - recommended capital

On average, the recommended capital can range from USD to 1, USD. This is ideal, but requires a leverage of at least if you want to trade actively and reap the rewards. However, choosing a high level of leverage can leave you exposed to the risks. These risks can be avoided as long as the trader is disciplined and patient.

Most traders tend to slip at some point in their trading and this leads to a major downward spiral. This can come by becoming over-leveraged or by ignoring the risk management rules.

Ideally, trading with the capital stated above with the recommended level of leverage can help traders to slowly build a profitable return on their capital. However, this requires the discipline to focus on just one or a few currency pairs.

Traders also need to ensure that they keep their positions clean and not open multiple positions on various instruments.

Conclusion

In conclusion, contrary to the popular advertising by Forex brokers; where you can trade with as little as $, it is important to understand the risks of being undercapitalised.

Many traders focus on converting their $ in capital into big profits, but this is not often the case. Being adequately capitalised is the basis from which everything else comes. This includes leverage that you are using and eventually comes down to the trading strategy and the stop loss levels that will determine the outcome of your trading success.

If given a choice, traders should focus on choosing enough capital so that they can choose their leverage wisely. This in turn will help traders to focus on their money management and trading strategy skills to build a consistently profitable business trading Forex.

Are you anticipating to open a live Forex trading account? If so, you require initial capital. Capital in this case refers to the amount of funds that the traders is willing to set aside (deposit into his trading account for the purposes of trading). Forex is one of the financial investments where the investor or trader doesn’t necessarily require too much funds to begin with. Nevertheless, even though you don’t require too much cash for you to start trading, having too little in your account actually adds to the risks of Forex trading . The smaller your trading capital, the more the risk your money is at. A small account can easily be wiped clean especially when the market makes some unpredicted and unexpected movements – particularly during economic news releases.

There are various factors that affect the amount of capital that a trader requires. These factors include:

• The broker
• The type of trading account
• The leverage
• The amount of lot size that the trader is planning to use to open positions
• The trading strategy that the trader is intending to use

The broker

The forex financial market has different brokers that offer trading platforms for individual traders. Each broker has their terms of operation that the trader ought to agree to before opening any account with them. There are some traders that will allow as little as five dollars of capital. However, it should be the work of the trader to check and see that the amount of capital that he or she is investing is safe. It is not always that having a minimum amount of capital is the best option. Too small an amount of capital may lead to losing all of the initial capital.

Actually the minimum amount of capital that the brokers indicate should only be used to help you open an account. Then after you have a validated trading account, you should seek to have a substantial amount of capital in your trading account so as to reduce the risk of getting a margin call. This amount will depend on the type of forex account that you are interested to open.

The type of trading account

The kind of account that you hold will significantly influence the amount of capital that you ought to have. The difference in the type accounts is how much each lot is worth. In a micro account, if you use lot size and the market prices moves by points (10 pips), that will be equivalent to units of the type of currency that you are using in your account. If you use US Dollars it will be 10c per pip movement. The minimum capital for this type of account is $5. However to be safe, you should have at least $50 for you to trade comfortably without the risk of a margin call.

On the other hand, if you had a standard account , if you open a position using lot size and the market moves by points (10 pips), it will be equivalent to 1 unit of your account base currency (currency that you use for your account). This means that if your account is in US Dollars, it will be $1. In most cases the minimum amount of capital for the standard accounts is usually $ However, you will meet some brokers that will require you to have a higher initial deposit when opening your account. But for your own safety, you should at least ensure that you have $ 1, in your account.

If you decide to open an executive account the pip value calculation will be equivalent to that of the standard. The difference comes in the initial capital required and the leverage. For most of the executive accounts the minimum is usually $ 5, However there are some brokers especially ECN brokers that have mini and standard accounts while others have standard, and executive accounts only.

The leverage

What is leverage? In simple terms, leverage allows the traders to open trades that are worth more than the actual amount of money in their accounts. So, the traders “borrows” some amount of money from the broker. The higher the amount of leverage, the more the trader can open more trades or trades of larger lots with lesser amount of capital. Therefore if you decide to use a small leverage, you have to have a substantial amount of capital. The maximum amount of leverage varies from broker to broker and across the different accounts that the brokers offer.

There are some brokers that offer leverage ratios from as high as , down to as little as (no leverage). The higher the leverage, the lower the margin required for every transaction. For example with a leverage of , every transaction requires 2% margin of the total value. This goes to show that you have to have a substantial amount of capital; in your account. But if you used a leverage of , you would require % margin of the total value. Thus you can trade with even lesser amount of capital. The margin will be the multiplication of the volume and lot size (micro or standard) divided by the leverage.

The amount of lots that the trader is planning to be using to open any position.

The lot size directly affects the free margin. With a micro lot size the amount on lots used translate to a very small used margin. On the other hand with a mini or standard lot sizes, the used margin is relatively high. The lot size is dependent on the type of account that you open. The micro lot size is used for the micro accounts while the standard lot size is used for the standard accounts and the mini lot size is for the mini accounts.

The trading strategy that the trader is intending to use.

The trading strategy is also a crucial aspect when looking into the amount of capital that that a trader should have. For a scalper, a minimum of $10, trading capital might be necessary so that each trade is opened with a relatively larger lot volume and hence better returns as compared to if the capital was less at let’s say $ which would cause the trader to open trades with lesser lot volumes and hence lesser returns.

Also if you trading strategy require there to be too many trades at a time, you will require a larger amount of capital so as to cater for the required margin to open all those trades. If you open too many trades at a time without considering the amount of free capital you will end up with a very small amount of available margin, which will mean there will be very high chances of receiving a margin call.

So what is the right amount of capital?

For intraday traders, it might be recommended to at least have an initial capital of $2, For the scalpers a minimum of $10, For long term traders, they should have at least $20, also so as to sustain the trade for a longer time in the market while still aiming at their target levels. However, this doesn’t mean that if you don’t have this amount of capital you can’t trade. No. You can still trade but you will be putting your capital which you have saved for some time at a great risk. It is always good to wait until you have the right amount of capital required.

Depending on the amount of leverage, lot size, the lot volume and the number of open trades at a time the traders can be in a good position to know exactly how much capital he or she should have.

The amount of Capital = Number of trades ((Lot Size × Lot Volume)/ Leverage)

For example with a leverage of , micro lot size, a lot volume of 10 and necessity of 5 trades at a time, the trader will require approximately $ 20, at any instance of trading. And to be safe, the trader should at least have % of the amount that is required for every trading so as to take into consideration the spread and other market factors like retracements. If any of the above is changed the required amount of capital will be greatly affected. For example if the leverage is increased to , the trader will require approximately $2,

NB:

Accessibility in the forms of leverage accounts—global brokers within your reach—and the proliferation of trading systems have promoted forex trading from a niche trading audience to an accessible, global system.

The amount of capital traders have at their disposal will greatly affect their ability to make a living. A trader's ability to put more capital to work and replicate advantageous trades is what separates professional traders from novices. Just how much capital a trader needs, however, differs vastly.

Considering Leverage in Forex Trading

Leverage allows individuals to use borrowed money to buy investments. It offers a high level of both reward and risk. Unfortunately, the benefits of leverage are rarely seen. Leverage allows the trader to take on larger positions than they could with their own capital alone, but impose additional risk for traders that do not properly consider its role in the context of their overall trading strategy.

Leverage can help magnify returns. But best practices would indicate that traders should not risk more than 2% of their own money on a given trade. Keep in mind that it's always prudent for less-experienced traders to adhere to the 1% rule to minimize their risks even further. Leverage can be used recklessly by traders who are undercapitalized, and in no place is this more prevalent than the foreign exchange market, where traders can be leveraged by 50 to times their invested capital.

A trader who deposits $1, can use $, (with to 1 leverage) in the market, which can greatly magnify returns and losses. This is considered acceptable as long as only 1% (or less) of the trader's capital is risked on each trade. This means that with an account size of $1,, only $10 (1% of $1,) should be risked on each trade.

While difficult in practice, traders should avoid the temptation of trying to turn their $1, into $2, quickly. It may happen, but in the long run, the trader is better off building the account slowly by properly managing risk.

Respectable Performance for Forex Traders

Every trader dreams of becoming a millionaire by making intelligent bets off of a small amount of capital. The reality of forex trading is that it is unlikely to make millions in a short time frame from trading a small account.

While profits can accumulate and compound over time, traders with small accounts often feel pressured to use large amounts of leverage or take on excessive risk in order to build up their accounts quickly. When factoring fees, commissions, and/or spreads into return expectations, a trader must exhibit skill just to break even.

Simply being profitable is an admirable outcome when fees are taken into account. However, if an edge can be found, those fees can be covered and a profit will be realized. A trader that averages one tick per trade erases fees, covers slippage, and produces a profit that would beat most benchmarks.

Undercapitalized Making a Living in Forex Trading?

The high failure rate of making one tick on average shows that trading is quite difficult. Otherwise, a trader could simply increase their bets to five lots per trade and make 15% per month on a $50, account. Unfortunately, a small account is significantly impacted by the commissions and potential costs mentioned in the section above.

In contrast, a larger account is not as significantly affected and has the advantage of taking larger positions to magnify the benefits of day trading. A small account by definition cannot make such big trades, and even taking on a larger position than the account can withstand is a risky proposition due to margin calls.

If the goal of day traders is to make a living off their activities, trading one contract 10 times per day while averaging a one-tick profit may provide an income, but is not a livable wage when factoring in other expenses.

The Bottom Line

There are no set rules on forex trading—each trader must look at their average profit per contract or trade to understand how many are needed to meet a given income expectation, and take a proportional amount of risk to curb significant losses.

Often perceived as an easy moneymaking career, forex trading is actually quite difficult, though highly engaging. The foreign exchange market is the largest and most liquid market in the world, but trading currencies is very different from trading stocks or commodities.

Due to its high liquidity, 24/7 schedule, and easy accessibility, forex trading has emerged as a popular career, especially for people with a financial background. Being your own boss with the comforts of making money using your laptop/mobile is enough motivation for both young graduates and experienced professionals to consider forex trading as a career.

However, forex trading has its disadvantages, such as high risk and volatility.

Prosof a Forex Trading Career

There are several advantages that a career as a forex trader, also known as a foreign exchange trader, offers. They include:

Low Costs

Forex trading can have very low costs (brokerage and commissions). There are no commissions in a real sense–most forex brokers make profits from the spreads between forex currencies. One does not have to worry about including separate brokerage charges, eliminating overhead costs. Compare that to equity or other securities trading where the brokerage structure varies widely and a trader must take such fees into account.

Suits Varying Trading Styles

The forex markets run all day, enabling trades at one’s convenience, which is very advantageous to short-term traders who tend to take positions over short durations (say a few minutes to a few hours). Few traders make trades during complete off-hours.

For example, Australia’s daytime is the nighttime for the East Coast of the U.S. A U.S.-based trader may trade AUD during U.S. business hours, as little development is expected and prices are in a stable range during such off-hours for AUD. Such traders adopt high-volume, low-profit trading strategies, as they have little profit margins due to a lack of developments specific to forex markets. Instead, they attempt to make profits on relatively stable low volatility duration and compensate with high volume trades. Traders can also take long-term positions, which can last from days to several weeks. Forex trading is very accommodating in this way.

High Liquidity

Compared with any other financial market, the forex market has the largest notional value of daily trading. This provides the highest level of liquidity, which means even large orders of currency trades are easily filled efficiently without any large price deviations. This eliminates the possibility of price manipulation and price anomalies, thereby enabling tighter spreads that lead to more efficient pricing.

Traders don't need to worry about the high volatility during opening and closing hours, or stagnant price ranges during the afternoons, which are trademarks of equity markets. Unless major events are expected, one can observe similar price patterns (of high, mid, or low volatility) throughout the non-stop trading.

No Central Exchange or Regulator

Being an over-the-counter market operating across the globe, there is no central exchange or regulator for the forex market. Various countries’ central banks occasionally intervene as needed but these are rare events, occurring under extreme conditions. Most such developments are already perceived and priced into the market. Such a decentralized and (relatively) deregulated market helps avoid any sudden surprises. Compare that to equity markets, where a company can suddenly declare a dividend or report huge losses, leading to huge price changes.

This low level of regulation also helps keep costs low. Orders are directly placed with the broker who executes them on their own. Another advantage of deregulated markets is the ability to take short positions, something that is banned for a few security classes in other markets.

Volatility Can Be a Trader’s Friend

The major currencies frequently display high price swings. If trades are placed wisely, high volatility assists in enormous profit-making opportunities.

Variety of Pairs to Trade

There are 28 major currency pairs involving eight major currencies. Criteria for choosing a pair can be convenient timing, volatility patterns, or economic developments. A forex trader who loves volatility can easily switch from one currency pair to another. 

Low Capital Requirements

Due to tight spreads in terms of pips, one can easily start forex trading with a small amount of initial capital. Without more capital, it may not be possible to trade in other markets (like equity, futures, or options). Availability of margin trading with a high leverage factor (up to to-1) comes as the icing on the cake for forex trades. While trading on such high margins comes with its own risks, it also makes it easier to get better profit potential with limited capital.

Ease of Entry

There are hundreds of forex technical indicators to draw on for short-term traders and several fundamental analysis theories and tools for long-term forex trading, creating an enormous choice for traders with varying levels of experience to make a swift entry into forex trading.

Consof a Forex Trading Career

In essence, there are lots of advantages to forex trading as a career, but there are disadvantages as well.

Lack of Transparency

Due to the deregulated nature of the forex market dominated by brokers, one actually trades against professionals. Being broker-driven means that the forex market may not be fully transparent. A trader may not have any control over how his trade order gets fulfilled, may not get the best price, or may get limited views on trading quotes as provided only by his selected broker. A simple solution is to deal only with regulated brokers who fall within the purview of broker regulators. The market may not be under the control of the regulators, but the activities of brokers are.

Complex Price Determination Process

Forex rates are influenced by multiple factors, primarily global politics or economics that can be difficult to analyze information and draw reliable conclusions to trade on. Most forex trading happens on technical indicators, which is the primary reason for the high volatility in forex markets. Getting the technicals wrong will result in a loss.

High Risk, High Leverage

Forex trading is available on high leverage, meaning one can get profit/loss exposure multiple times of the trading capital. Forex markets allow leverage of , so one needs to have only $1 to take a forex position worth $ While a trader can benefit from leverage, a loss is magnified. Forex trading can easily turn into a loss-making nightmare unless one has a robust knowledge of leverage, an efficient capital allocation scheme, and strong control over emotions (e.g., the willingness to cut losses short).

Self-Directed Learning

In the stock market, a trader can seek professional assistance from portfolio managers, trade advisors, and relationship managers. Forex traders are completely on their own with little or no assistance. Disciplined and continuous self-directed learning is a must throughout the trading career. Most beginners quit during the initial phase, primarily because of losses suffered due to limited forex trading knowledge and improper trading.

High Volatility

With no control over macroeconomic and geopolitical developments, one can easily suffer huge losses in the highly volatile forex market. If things go wrong with a particular stock, shareholders can put pressure on management to initiate required changes, and they can alternatively approach regulators. Forex traders have nowhere to go. When Iceland went bankrupt, for example, forex traders holding the Icelandic krona could only watch.

The 24/7 markets make it difficult to regularly monitor prices and volatility. The best approach is to keep strict stop losses for all forex trades and trade systematically through a well-planned approach.

The Bottom Line

The foreign exchange market has emerged as a lucrative opportunity for people with a financial background. With low entry requirements and markets open 24/7, anyone with a laptop or smartphone can potentially score large profits in the forex markets. However, those opportunities also come with high leverage and high risk. Anyone seeking their fortune in forex will need strict discipline and skill in order to succeed.

It's easy to start day trading currencies, because the foreign exchange (forex) market is one of the most accessible financial markets. Some forex brokers require a minimum initial deposit of only $50 to open an account, while others allow you to open accounts with no initial deposit.

It is possible to take a set amount of capital and begin trading. However, there are several factors to consider when determining how much you need in order to start day trading on the forex market.

Minimum Capital for Day Trading Forex

If you must start trading right away, you can begin with $ For a little more flexibility, $ can lead to slightly more income or returns. However, $5, might be best, because it can help you produce a reasonable amount of income that will compensate you for the time you're spending on trading.

Set amounts don't help you understand the minimum amount required for your trading desires, life circumstances, or risk tolerance. You should understand the risks involved in trading forex and know how to mitigate them.

It's also important to know how forex trades are made and what they consist of, so that you can better gauge your ability to withstand losses on your way to making gains.

Understand the Risks

Since day trading is about trading on price changes, most of the risk is in the form of prices not moving the way you thought they might go. That happens often, so day traders shouldn't risk more than 1% of their forex account on a single trade.

Trading Risks

Leveraged trading and marginal trading occur when you use forms of debt to fund your trades. Both of these activities significantly increase the amount of risk you take on, and they increase the likelihood of owing much more than you did initially.

Trade risk, regarding the money you risk in one trade and not the risks mentioned previously, is the amount of capital you could lose. It is determined by finding the difference between your entry price and the price at which your stop-loss order goes into effect, multiplied by the position size and the pip value (discussed below).

Risk Management

While you can use leverage to fund your trades and be successful, the risks are so high that the best way to manage the risks involved is not to use leverage-based trading.

The 1% rule is one of the best methods for mitigating trade risk. If your account contains $1,, then the most you'll want to risk on a trade is $ If your account has $10,, you shouldn't risk more than $ per trade.

Learn Lot Sizes and Pip Values

When you buy or sell forex, prices move in "pips," and the amounts are sold in lots. The relationship between the two is important for establishing your minimum amount.

Lots

Forex pairs trade in units of 1, (micro), 10, (mini), or , (standard) lots. When USD is listed second in the pair—such as EUR/USD—and you fund your account with U.S. dollars (USD), the value of the pip per type of lot is fixed in USD.

If you hold a micro lot of 1, units, each pip movement is worth $ If you hold a mini lot of 10,, then each pip move is $1. If you hold a standard lot of ,, then each pip move is $

Pips

The forex market moves in pips, which stands for "percentage in point or price interest point." A pip is the smallest amount that a currency can change. For instance, in most currency pairs, a pip is , which is equivalent to 1/th of a percent.

If the EUR/USD price changes from to , that's a one-pip move. If it changes to , that's a pip move.

One exception to the pip value "rule" is the Japanese yen. A pip for currency pairs in which the yen is the second currency—called the "quote currency"—is , equivalent to 1%.

Create Stop-Loss Orders

When trading currencies, it's essential to enter a stop-loss order. Stop-loss orders automatically prevent significant losses if the base currency moves in the opposite direction of your bet. A simple stop-loss order could be 10 pips below the current price when you expect the price to rise, or 10 pips above the current price when you expect it to fall.

This method depends upon the amount you've limited yourself to trade with. A stop loss of 10 pips below could be a significant amount of money—if one EUR/USD pip costs $10, a pip move downward could cost you $ on one standard lot.

Determine Your Minimum Capital for Trading

It helps to see how different trading amounts can influence your minimum amount for day trading. The previous examples of $, $, and $5, are excellent for seeing the differences and working through the calculations to find your limit.

$ in the Account 

Suppose you open an account for $ You will want to limit your risk on each trade to $1 (1% of $).

If you place a trade in EUR/USD, buying or selling one micro lot, your stop-loss order must be within 10 pips of your entry price. Since each pip is worth $, if your stop loss were 11 pips away, your risk would be $ (11 x $ x 1), which is more risk than your strategy allows for.

$ in the Account

Now suppose you were to open an account with $ You can risk up to $5 per trade and buy multiple lots. For example, you can set a stop-loss 10 pips away from your entry price and buy five micro-lots. You'd still be within your risk limit, because 10 pips x $ x 5 micro lots = $5.

If you were to choose to place a stop-loss 25 pips away from the entry price, you could buy two micro-lots to keep the risk on the trade below 1% of the account. You would buy only two micro-lots, because 25 pips x $ x 2 micro lots = $5.

Starting with $ will provide greater trading flexibility and produce more daily income than $, but most day traders will still be able to make only $5 to $15 per day off that amount with any regularity.

$5, in the Account

If you were to start with $5,, you have even more flexibility and can trade mini-lots as well as micro-lots. If you buy the EUR/USD at and place a stop loss at (eight pips of risk), you could buy six mini-lots and two micro-lots.

Your maximum risk would be $50 (1% of $5,), and you could trade in mini lots, because each pip is worth $1, and you would have chosen an eight-pip stop-loss. Divide the risk ($50) by (8 pips x $1) to get for the number of mini-lots you could buy without exceeding your risk. You would break up mini-lots into six mini-lots (6 x $1 x 8 pips = $48) and 2 micro-lots (2 x $ x 8 pips = $), which would put a total of only $ at risk.

With this amount of capital and the ability to risk $50 on each trade, the income potential moves up, and traders can potentially make $50 or more per day, depending on their forex strategy and price changes.

Frequently Asked Questions (FAQs)

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