In our previous post we looked at a wrong idea people may have concerning how difficult it is to trade successfully…here we will explore contradictory misconceptions about capital requirements that are needed for trading.
Many new traders have an idea that they can success by starting with only few dollars.
This idea might have been put inside their heads by heavy advertising by brokers who let clients open accounts with credit cards, and let them deposit less capital than it would cost them if they purchased few burgers. Then, there are all these ‘advisors’ and market ‘gurus’ who are ready to show you how to get rich if you only pay them $100. None of them will make you rich fast! If they could, they would be enjoying a beach and exotic travels (a lifestyle many advertise you can achieve easily through their program), instead of fighting and struggling to get your $100.
It’s not to say you can not and should not start with few dollars. But, don’t expect to do anything other than learn at first, as those few dollars, regardless of your trade outcome, can only serve to show you the ropes. If you decide to risk $100 on forex, then it makes sense to divide it in three to four parts. So, if you lose first $25, you will still have capital to trade while your past mistakes can serve as a learning lesson so you do not need to repeat them again. This will not get you rich fast, but you will learn and that will help.
Contrary to that “only a few dollar” idea, is a belief that you need huge amounts of capital to succeed.
Many traders, especially after they suffer margin triggered losses, engage in unproductive thinking that they really did not need to lose if they only had large enough capital so they could last through loosing period until markets did not come back and recuperate their losses. They think that they could be successful if they only had so much capital that they never had to take a loss. That misconception has been proven wrong on many occasions, some which made news headlines about traders that lost millions for banks and other clients as shwon from one news inserts below:
N.Y. Times Article insert
So what is a bottom line truth here? When I first started to trade, many said not even to bother with trading if you do not have at least $25k. I do not think that is the case, and actually consider that a nonsense. However, you do need capital, both in a way of money you do not need so you can loose it, and in a way of acquired knowledge about how to trade without which no amount of capital is sufficient.
You Might Want To Check These Out:
- Forex Initial Capital Requirement
- Forex Terminology – Part 1
- Big Market Moves
- Forex Tips – 8 Essential Forex Trading Tips For Bigger Forex Profits
- 11 reasons that justify the Federal Reserve’s monetary policy
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