How Much Capital Do You Need To Start Trading Forex?
How much does an individual have to pay to start trading in Forex?
Forex trading is far easier than trading equities, as traders need to cover only a few major currencies such as the USD, GBP, EUR, and JPY. Trading forex is still not child’s play and warrants good knowledge and awareness about the world’s different markets, economy, and currencies pairs, in addition to news and current affairs that affect forex.
In order to start trading forex, in addition to the basic money required, some other requirements are mandatory.
1. Open an account with a broker
The first step is to open an account with a reputable and reliable broker – Easy-Forex.com for instance. Traders have the choice of opening an account on their own name or (family members), or even an account on their business name. Various brokers provide various kinds of account types; Easy-Forex provides 4 types of accounts as follows:-
|Account Type||Minimum Deal||Margin|
|Mini:||$2,500 minimum deal||$200 margin|
|Gold:||$50,000 minimum deal||$500 margin|
|Platinum:||$250,000 minimum deal||$5,000 margin|
|VIP:||$500,000 minimum deal||$10,000 margin|
Shariah (Islamic) Accounts are also available for those traders that would like to remain Shariah compliant, particularly muslim traders.
Platinum and VIP accounts are used by expert trades who understand the market better than the novice traders. Small or Novice traders who have a small amount of capital can use the Gold and Mini account as their main purpose is to learn the forex trading.
2. Complete Registration work
After deciding on the account type, traders have to go through a some registration formalities in which they need to provide some personal information (like name, address, date of birth), etc. along with payments, bank account and other related information.
After the completion of paperwork, brokers will get in touch with the client to notify of activation, after which they will provide details on accessing the terminal or platform for trading in forex. Money can be deposited in a number of ways; this needs to be clarified with the
broker beforehand. However, most brokers will accept the common payment methods such as credit card, PayPal and wire transfer.
After opening an account, the main question is how much capital will be required by a novice trader in the beginning? Money management plays a key role in trading decisions. For a novice trader, a smaller amount is better, as their main aim is to gain familiarity with forex trading, atleast
for starting out. This amount cannot be fixed; it differs from person to person- while one novice trader might say $1,000 is sufficient, another might think a minimum of $5,000 is required. The decision is a personal one, and like we said earlier, money management is critical.
For instance, Mr. X is 30 years old, working as a bank manager in New York. He wants to start trading in forex. His annual income is $30,000 and has a savings account with a balance of $40,000. A financial planner advised him to go for a 40:30:30 capital allocation plan, which means he places 40% in a risky investment (such as equity and forex) and the remainder in bonds and money market instruments. Based on this plan, he may choose to start with a balance of $5,000 to trade forex, where he can invest upto $250,000 in the market (platinum account with Easy-Forex.com).