How much money do you need to start trading forex?

Julie Brownlee, Fsp Invest, 18 Jun. 2015

Tags: forex, trading forex, amount to open a trading account, forex trading account, minimum amount to trade forex,

You can open a forex trading account with a surprisingly small amount of money through trading companies.

But you shouldn’t let this lure you into trading until you’ve worked out exactly how you’re going to split your money across your trades.

So how much money should you have to start trading forex?

Read on to find out…

Opening a forex trading account

You can open a forex trading account with as little as R500.

But before rushing into opening an account, you need to ensure you have enough money to trade that works with position sizing.

Position sizing is deciding how much of your trading account you should risk on each trade. A good percentage to use is 2%. By only risking a small amount of your trading capital on each trade, you can still incur losses without decimating your trading pot.

How can you work out how much you need to start trading forex?

To work this out, you need to know what sort of strategy you’ll follow and the stop losses you’ll use, Max Munroe in Profit Watch explains.

Say your strategy dictates you’ll usually use an 80 pip stop loss, but this will never exceed 150 pips. You decide to risk 2% per forex trade.

The smallest amount you can risk is R1 a pip. This means your maximum risk per trade is R150 (150 x R1).

That’s means your maximum stop loss is R150. To work out how much you need in your account to start trading, you divide R150 by 2%. This gives you R7,500.

This means you need R7,500 in your account to be able to risk R150 per trade and stick to using only 2% per trade with a stop loss of 150 pips.

If you use smaller stops, you can have less in your account. For instance, if you decide 80 pip stop losses will be the most you risk, you can risk R80 (80 x R1) a trade. This means you’d need R4,000 in your account to start trading.

Of course, this is just a guideline to get you started and to ensure you don’t start trading with too little in your account. If you run tighter stops, you’ll need less in your account to cover this and stick with the 2% rule.

The most important thing here is consistency and the returns you make. As you make money, you can risk more on each trade and stay within your 2% rule.

By starting off small, you give yourself a chance to learn more about forex trading and to get your strategy working for you.

So there you have it. How much money you need to start trading forex.

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Thato 2017-02-16 14:19:33


thembinkosi sipho 2016-11-26 04:24:00

it sounds so complicated to do and ununderstandble, can I get help to start with R500 SA


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