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How Much Money Do You Need to Start Trading Forex?

Posted March 18, 2020 by EasyFinance.com to Investing 1 0

When you say forex, it refers to the marketplace whose main commodity is the currency. While it might seem intimidating, the foreign exchange is the easiest to breakthrough compared to other financial markets.

More and more people are trying to learn how to trade forex. The reason is not really very complicated--there is money to be had here. For instance, according to the estimates, the average daily volume of transactions has increased by 40% over the past decade. For instance, the forex turnover was valued at $4 trillion back in 2010. The figure rose to $5.5 trillion between 2016 and 2019.

How Much Money Should You Start With?

As already mentioned, the day trading on currencies is rather accessible, compared to the stock market, for instance. In theory, you can start trading forex for only $50 or $100 as startup capital.

In comparison, the Securities and Exchange Commission mandates that day traders should always maintain an account with at least $25,000 in liquid assets.

Forex does not require a minimum amount to trade. Now, if you are just learning how to trade forex, you will know immediately that you do not start with $100.

Again, technically speaking, the $100 starting capital could yield returns depending on your broker or the trading style. If you are looking to go into the FX market as a means to boost your portfolio, then you need to have a deeper pocket. But if you view currency trading as a passive income, then start with a little amount and scale-up.

When the Going Gets Tough

Currency trading offers no guarantee. Even the best traders out there suffer a blow or two, although they already know how to mitigate the losses through effective risk management. If you are still new to the game, it is recommended that you do not put all your earnings into the marketplace. You need to have enough money to absorb a massive loss that could wipe out all your investments in forex.

In simple terms, your exposure should not be more than 2% of your balance during a trade. So, in case of a bad yield, you still have enough in your account to move forward.

Should You Hire a Broker or Trade Forex Yourself?

If you are even asking this question, it means you are considering the idea of learning how to trade forex.

A broker does offer something that newbies do not yet possess--experience. However, you can manage the risks if you have the correct fundamentals.

For example, if you are taking a forex trading course, you will gain:

1. Exhaustive knowledge and understanding of how the currency market works, as well as the macroeconomic factors that impact the financial market.

2. The skills to come up with your capital management plan and, along the way, mitigate the risks and also strike at market opportunities for optimum profits.

3. The patience to follow through with the daily activities and the ability to execute trades with few mistakes.

4. The appreciation for the rules, particularly on the ethical practices of flex trading. They will also know how to take the initiative and not merely follow the trends.

If you are serious about the business, then it is recommended that you earn a diploma in forex trading. Even if you hire a broker to manage your account, a deep understanding of the risks and opportunities ensures that nobody will take advantage of you.

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