Big Money, Small Money?

How Much Money Do You Need To Be Able To Trade Full Time? 

This is probably a question every trader asks themselves, many times during their journey. Now most of the time, new traders will hear that you need at least 2 years worth of "bill payments" before you consider trading full time.

Every newcomer, is sold the idea that Forex will fulfill your dreams of Financial Independence. 

Seeing the success stories of Forex, everyone always asks "How much did you start with?"

Losses = Tuition...

Most traders that start off develop the idea that the amount of money you start with will reflect whether you are successful or not. I see it like this, When you start out, whatever your bank roll is, be prepared to pay "Tuition". 

I have paid a fair amount of tuition in the Forex market, I still do, but my tuition is not as expensive. Where am i going with this? 

Tuition is the price you pay for your losses. Losses can teach you so much. However, are you prepared to learn from the mistakes that you pay "tuition" to? More importantly, can your account withstand these tuition fees? 

BIG Money...

Big or Small...Either way, what can you manage effectively? 

Big or Small...Either way, what can you manage effectively? 

What is Big Money? £10,000? £25,000? £100,000? 

Benefits of Large Bank roll 

  1. Properly capitalised. 
  2. Can withstand draw downs without it affecting the full balance.
  3. You can stay engaged in the market. 

Big Money accounts, will carry many psychological/emotional influences. Can you handle trading a large balance? Have you ever experienced managing such a large balance? What does your capital mean to you? Is it from savings? Inheritance? Lottery win? 

Now i applaud anyone who is able to work and save money to trade Forex, it requires dedication, determination and discipline to save money. Having a large bank roll when starting out in trading, can be great but you will set yourself up to experience many pitfalls if correct management of a large bankroll is not applied, more so how would you feel losing all that money you worked so hard for?

Small Money...

Back when i was first starting out, the minimum investment that was needed to trade a "Day Trade" account was £25,000. Today, you will see many brokers introducing more liquidity into the market by allowing small accounts to be opened with a minimum investment of £10, £50 £100. Great for any new trader starting out. 

A small account has many benefits. 

  1. Less emotional attachment to the money
  2. Mistakes are not costly 
  3. Experimenting platforms with real money/execution timing. 
  4. Testing new methodologies with money on the line. 

Small money accounts must be utilised by all traders starting out. It allows the new trader to test the waters, to really experience the psychological/emotional elements of using Real money. You must build your relationship/tolerance with "risk".

Many new traders first turn to demo trading with £100,000, triple it, and then open a live account with £500 and expect to reflect the same performance on demo with your live account. This way of trading is guaranteed to blow your account. 

Management...

The main goal for a new trader, or should i say, the ideal case scenario, would be to trade full time and generate a source of income that is sustainable. The problem is, we have to be realistic and see things logically. 

The first objective of any trader is to develop their ability to connect with the market using a real money account and study the emotions they experience.  The new trader must learn to "manage" their emotions so that they can trade with a calm free state of mind. They must apply their methodology objectively. Take signals when presented, close profits and close losses. The new trader must get into the habit of applying this process with a small money account, be familiar with the process, then consider progressing towards funding the account with more money. 

The psychological benefits of using a small account will allow the trader to see the market for what it is and not fall into the pitfalls of "expectation". This will lead to failure. 

look, i am not advocating that having a Big balance is not good. But i will say this, Its better to lose small amounts of money than larger amounts. Most traders that enter with £100,000 lose about 50% and decide its not for them. Statistically they have not given themselves the chance to succeed in the markets, because their loss was so big they fear it happening again.

The problem is, all new traders have the "expectation" mind. New traders come into this arena, with the premise that they are going to be rich. They fail to approach Forex systematically. They lose their money, then accept that Forex is not for them. 

Trade Well..

For you to stand a chance in this game, manage your emotions with real money. Once you have done this, you will then approach trading with a systematic way of thinking. You will avoid experiencing draw downs that will trigger your emotions. Big Money or Small Money Accounts, it doesn't matter, its numbers on a screen. Your job is to trade objectively. 

Make it easier for yourself, trade with a small account, get used to managing money.  If you cant manage a small account, how are you to manage a large account? Build your tolerance to losing money. Accept the losses.

Focus on Trading well. Never focus solely on the money, let the money come to you. 

Trade Calm 

Tino