How much should we invest in Forex trading? Too much, we will end up broke, too little, we won’t make anything. What is the amount of money, right enough, to start trading professionally on Forex? There are a lot of answers out there on the interwebs, and most of them are bad advice. Lines you are about to read, are not here to make you happy, they are here to represent the truth, without sugar-coating it. Plain straight. 95% of podcasts, YouTube videos, forums, tweets are just white hum static in the air. How do you know this isn’t? Don’t get depressive, read it to the end. There might be light at the end of this tunnel, even it is not something you were expecting.
So, how much money do we need to trade professionally? And what does it mean, professionally? That means you are trading actual money, the amounts are not important, big or small. When you hear someone presents themselves like trading professionals, take it with a grain of salt. Professionals are not kids playing with their demo accounts. Having a real trading account doesn’t make you a professional. You have to live on the money you earn by trading. Someone has to see you are good enough to hire you to trade their money.
Back to the money. Depending on a broker, the least amount of money needed would probably be $500 in the US. Globally, some might go lower than $500, even up to $1 micro account. Does 1 dollar account sound reasonable to you? Here is the part you don’t want to read. You are young, you want easy money. You heard over this thing on the internet, you dig a little, you learn how to read a chart, tinker with tools to predict prices with the RSI or Fibonacci indicators and it seems to work. And so you awe and think to yourself – I’ll use this for my trading, and get 50 to 1 dollar invested. Just imagine, it’s even better if outside of the US, a $100 for 1 invested. Millions are waiting, just repeat. And with that belief, you set yourself for failure, because the system you have set up is unreliable, works sometimes, 50% at the best. It leads you to believe you can leave your job, gives you unrealistic expectations.
Your system doesn’t work because you have never developed money management skills. A combination of confidence and undeveloped skill is deadly. For example, you trade short, and the price is long, and instead of abandoning with loss, you follow indicator with the belief it is going to straighten itself, but, it didn’t and you burn the account. This is what we are trying to avoid. Some people will follow the same patterns even if they don’t work perpetually, some will drop after only one bump. Sometimes one mistake is there to teach us and give us a better position. To succeed, confidence and motivation are both needed, and you cannot burn somebody else’s money to do it. To build those attributes think beyond those 500 dollars, see it just like a drop in an ocean. They are just a guide to help you ease trade with real money, to let yourself of emotions. You will not turn that initial deposit into anything remarkable, regardless of what internet tells you. We see a lot of scammers today, with promises of 100 pips a day. Experienced traders can confirm that the market conditions will not allow for this amount of pips to be made each day.
So what do we have to toy with now? We have tested and proven our system. How much money do we need to trade professionally? How much is enough to have good revenue and let you live by trading on Forex? Let’s play with a sum of $100000, that’s burning a hole in your pocket. You are in the top 2% of all earners in the US, globally in the 1%. That’s a really narrow percent of people. With that amount of money, what would be a good rate of return per year, on Forex? 11% per year is average. And that is already unreal for a new trader, as it takes a lot of time to get to that percentage. Compound interest over time will grow your fortune over a longer time, but as a young trader, you don’t have that luxury. So, what have experienced traders get per year? 13-14% per year return is top for very best financial advisors. A very rare and small group. Unique occurrence in the form of Warren Buffet will profit with a 20% return per year.
So at best, on $100000 you profit 20%, and that’s 20000 dollars per year before taxes. Or to bring it more into the perspective of monthly living, which is less than 1700 dollars per month. Can we go with 1700 dollars per month? Does that sound like a comfortable life, or can you even say you can make ends meet on that amount? As a professional trader, that would be all you get and if you spend it on daily living, you would be limited in investing further. So, after many years, what you have to work with is less than average yearly income, and that is if by some miracle you get a 20% return. So, that’s the direct answer to the question. Don’t despair, read the rest.
Luckily, there are companies out there, that are willing to invest in you and give you money to trade in their name. Of course, they are willing only if you prove yourself worthy, with properly setup systems and consistent results over time. But first, understand, that to master Forex trading it is necessary to suppress emotions, to be able to easily overcome losses and deal even with wins. That will start providing consistent results. Consistent results will give you an in-depth view of your system, and you will be able to fine-tune it to out give even better results.
Now, starting with demo accounts or small accounts is beneficial to smooth out the trading process, see where you are thin, and to show that you can do good trading in the long run with steady results. This is how we want to present ourselves to trading companies. When they engage you, trading companies will arrange their own tests. They will set a test period and see how you do under pressure, which is usually about 6 months. Don’t be upset by this time period, there is no other way for them to expose lesser traders that can’t maintain steady results. Constant results are hard to achieve, and that will separate a “trader” from a professional trader.
So, back to the question, how much money do you need to trade Forex professionally? Here is a more extensive answer. Not that much. There are a lot of trading firms out there, with lots of different options, and joining them can cost no more than a couple of hundreds of dollars. You just have to have the good sense to trade and be patient enough to build a good system that will attract trading firms. Then you have to be able to prove that system and stay consistent. If you want, you can also start a small account and trade in parallel with your trading firm.
Hopefully, you will see these lines as a guide, to help you save a fortune on burnt accounts, time, and unrealistic expectations. We hope, with this article, to shorten the amount of time to create good traders. Long term traders, that are not all about “easy money”, and in that way enable a dream of sustainable, comfortable living.