How much capital do you need for trading?
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The starting capital to deposit onto your trading account depends on a lot of criteria. These criteria are unique to each individual and there are no strict rules about the amount of capital you need to deposit. Remember one simple consideration: If you need the money, or may need in the future, then be cautious about trading with it. Trading should never jeopardize your personal financial health. This will generate additional stress in your trade management (you will cut at the slightest loss, etc.). If you are not prepared to lose the capital invested, you cannot win in the financial markets in the long run. If you do not follow this rule, little is to be gained by continuing to read this article.
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With CFDs you can process indices from €1 a point (for example on CAC which goes from 4000 to 3999 points), and stocks from €7. So you have a margin before you get to 0. Remember to check with your broker if these spreads are fixed on CFDs.
On Forex, you can take positions on mini lots of 1000 units, or $0.1 (€0.78) per pip if you trade on the EUR/USD for example.
If your goal is to train, it might be wise to deal with the smallest position sizes.
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If you are a novice, you should also pay attention to the products you use in your trading. It is important to fully understand how it works and the risks. Deal with small position amounts to minimize your leverage.
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Between €500 and €1,000, there is a certain trading margin. You can cash out losing trades without risking too much of your capital. It is important, however, to be able to scrupulously respect the money management rules and equally important to deal with the lowest position amounts (mini lots) whatever the product processed.
Above €500, there is a higher emotional factor because it represents a significant sum. You will therefore be able to discover the different elements of a trader’s psychology. In fact, the amount must be large enough for you to be afraid of losing it. This is the only way to learn how to manage the loss phases (which are part of trading). If you can take a loss without flinching (without changing your risk at the next trade or questioning your strategy), you are on the right track.
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Careful, don't skip any of the steps. Before hoping for additional income, it is important to have ticked the training box. Depositing a large amount right from the start will only put your capital at risk (the temptations are daunting). It's totally useless and above all very risky!
To expect additional income, it is important, therefore to already be a disciplined trader who knows how to respect the money management rules and scrupulously apply a trading plan. You no longer have to ask yourself any questions about the type of trader you are (scalpers, swing traders, trend trader, counter trend trader, etc.). Ultimately, you know that loss phases are part of trading, you have accepted it.
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Those who live from trading generally have years of trading behind them and are consistent winners for several years on the financial markets.It is important to have unwavering confidence in your trading strategy. Trading then becomes repetitive and sometimes boring. You are simply looking for trading opportunities to blindly apply your trading strategy. Nothing surprises you any more, you perfectly master the psychological factors of trading. A stock market crash does not make you hot or cold, you no longer feel any excitement in your trading. Trading is just another job for you.
What are the criteria that determine your starting capital?
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Your expectations
: What do you expect from your deposit? Do you aim to make a living from it, to find an income supplement or simply to train yourself? This is a very important issue. You might tell me that the objective of trading is to earn money. Yes, but you don't make money without training. If this is your first deposit, there is no point in depositing a large amount. At the beginning, mistakes are numerous and the goal is not to earn money, but to last. If you last, you could win some later. If you are a new trader, your deposit should not exceed €1,000. You're going to tell me that's barely enough. Here's a quick summary to prove you wrong:With CFDs you can process indices from €1 a point (for example on CAC which goes from 4000 to 3999 points), and stocks from €7. So you have a margin before you get to 0. Remember to check with your broker if these spreads are fixed on CFDs.
On Forex, you can take positions on mini lots of 1000 units, or $0.1 (€0.78) per pip if you trade on the EUR/USD for example.
If your goal is to train, it might be wise to deal with the smallest position sizes.
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Your financial means
: Your starting capital will depend on your financial resources. If you have limited resources, your starting capital for trading should not impact your lifestyle. Using a very small part of your savings to train and invest makes sense, but depriving yourself of all the joys in life to be able to trade is unwise (unless trading is for you is a passion and not just a way to earn money). If you have more financial resources, this is not a reason to deposit too large an amount. Depositing a large amount will not provide you with better training. Your capital is your working tool. First go through the training stage before depositing a larger amount, during this period, to make good use of your trading strategy.-
Your trading level
: The lower your trading level, the smaller your starting capital should be. It is important, therefore, to minimize the risks on each of your trades. Only take positions on trading signals that seem clear to you. Before you can process in real time, you might wish to process on a demo account. It is an obligatory and essential step to train yourself. There are a lot of advantages to starting with ademo account where the final objective is to test your trading strategy. The switch to a real account lets you test your strategy in real conditions. If you see that you are not successful (psychological reasons, bad money management or a bad strategy), rather than continuing, consider reverting to your demo account. It is better to conserve your real capital for as long as possible.If you are a novice, you should also pay attention to the products you use in your trading. It is important to fully understand how it works and the risks. Deal with small position amounts to minimize your leverage.
The different amounts of capital to deposit depending on your objectives
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Training
: If your goal is to train, you can deposit between €500 and €1,000. If you have less than €500, you should consider whether trading is really for you. On the one hand, you have too few financial resources and generally in this case, traders have high expectations. They see trading as a way to enrich themselves, to change their lives, to make a fortune (and that's guaranteed to ruin them). On the other hand, you will be limited in how you manage your trades. If you suffer several losing trades, the margin required by the brokers for opening each trade can lead to your positions being automatically cut. Additionally, you can then quickly switch to the "I want to make up for my loss" mode, which normally ends up with a total loss of invested capital.Between €500 and €1,000, there is a certain trading margin. You can cash out losing trades without risking too much of your capital. It is important, however, to be able to scrupulously respect the money management rules and equally important to deal with the lowest position amounts (mini lots) whatever the product processed.
Above €500, there is a higher emotional factor because it represents a significant sum. You will therefore be able to discover the different elements of a trader’s psychology. In fact, the amount must be large enough for you to be afraid of losing it. This is the only way to learn how to manage the loss phases (which are part of trading). If you can take a loss without flinching (without changing your risk at the next trade or questioning your strategy), you are on the right track.
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Additional income
: If your goal in trading is to supplement your income, then the amount is highly variable and depends on your earning goals. Do not imagine earning €5,000 in the year if your starting capital is €1,000. Objectives must be realistic. 10% annual profitability is already quite an achievement. If you want to make €200 or €300 per month, you have to deposit between €20,000 and €30,000. Yes, it's a lot, but we can’t get something for nothing! Do you know many investments that can earn you 10% a year?Careful, don't skip any of the steps. Before hoping for additional income, it is important to have ticked the training box. Depositing a large amount right from the start will only put your capital at risk (the temptations are daunting). It's totally useless and above all very risky!
To expect additional income, it is important, therefore to already be a disciplined trader who knows how to respect the money management rules and scrupulously apply a trading plan. You no longer have to ask yourself any questions about the type of trader you are (scalpers, swing traders, trend trader, counter trend trader, etc.). Ultimately, you know that loss phases are part of trading, you have accepted it.
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Trading for a living
: Very few people are able to make a living from trading for the good and simple reason that you need a large amount of capital in the order of €200,000 to €300,000. For example, you want to pay yourself €2,000 per month. If you calculate that the state will take about half of your earnings, once you declare trading as your main activity, you therefore need to generate €4,000 per month, or €48,000 per year. Assuming that a pro trader can generate 20% profit per year, you therefore need to have a starting capital of €240,000.Those who live from trading generally have years of trading behind them and are consistent winners for several years on the financial markets.It is important to have unwavering confidence in your trading strategy. Trading then becomes repetitive and sometimes boring. You are simply looking for trading opportunities to blindly apply your trading strategy. Nothing surprises you any more, you perfectly master the psychological factors of trading. A stock market crash does not make you hot or cold, you no longer feel any excitement in your trading. Trading is just another job for you.
