Forex starting capital

If you cannot dedicate at least 10 hours a week to it then you won’t make money.

My list of forex bonuses

How Much Do You Need To Start Forex Trading, forex starting capital.

Between 10-30 hours = part time trader, which I believe can make about 20-50% per year on their money and 40+ hours = full time = 50%+ yearly ROI. Hope this clears this up. Remember to subscribe and comment below and if you haven’t done so yet check out our starter trader 10,000 word guide and our free ebook.

How much do you need to start forex trading?

Yesterday I emailed our subscribers asking what they wanted answers to and any issues they were having. One of the primary themes we saw was people hadn’t started yet, and worse they didn’t know how to get started.

All I can say is don’t overthink it.

I’ll get onto how much you need to get started in a second but first we need to talk about over-analysis-paraylysis. I can’t remember who came up with that phrase but its one of my favourites in the business & investing world. This is simply where an individual takes no action because they are paralysed by the amount of information out there. This is very common and I am personally guilty of this too. A phrase instead to live by is below.

An ounce of action is worth a ton of theory

So now that we have that covered, let’s get back to the primary question at hand. How much do I need to start trading? That’s an extremely broad question that depends on 3 things:

How much knowledge of trading do you have?

What is your long term aim? Full time trader? Part time? Just for fun?

How much time can you dedicate to it?

If you cannot dedicate at least 10 hours a week to it then you won’t make money. Between 10-30 hours = part time trader, which I believe can make about 20-50% per year on their money and 40+ hours = full time = 50%+ yearly ROI.

But that still doesn’t answer our question.

So this is a general rule: you want to start with the MAXIMUM amount you can afford to lose. I also don’t recommend anything under $10,000. The reason? Well let’s do the maths. Assuming you make 50% a year and DON’T withdraw any along the way. This $10k becomes $400k in 10 years and 15 years? Well that’s $3 million, this is assuming you don’t withdraw and you earn 50% per year. This is of course not easy and you will have to have the knowledge and systems in place BEFORE getting started. But back to our original point it is a lot better to take some action than to take none at all. Even if that’s demo accounts, which I hate, that is still better than nothing.

There are other types of action

Making trades is not the only type of “action”. Instead you can begin researching new potentially profitable theories, brush up on support and resistance training, earn money to increase your starting capital or back-testing systems or strategies you think may have been profitable in the past. Although past results DO NOT equal future results, there is a lot of proof that strategies tend to perform the same if set-up correctly.

Hope this clears this up. Remember to subscribe and comment below and if you haven’t done so yet check out our starter trader 10,000 word guide and our free ebook.

Tom is the owner of elite forex trading. A website that provides beginner tips, trainings, reviews and strategies to help newbies get started making money in the forex markets.

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Disclaimers

Disclaimer: elite forex trading offers general advice only – we do not take into consideration your individual circumstances, be sure to use other information alongside this website’s content if you plan to invest. By using our information and learning from our content, you automatically agree that it is only for educational purposes and so you will not hold any person or entity responsible for any losses or damage caused by any of the content we have provided or the general advice we have given. This extends to employees, directors, and fellow members of elite forex trading. Forex trading has large potential rewards when carried out correctly, but also has the potential for large losses. In order to invest, you should be aware of the risks associated with trading and are willing to accept them. Please do not trade with capital you cannot afford to be left without. We do not promise any person or entity will achieve profits or losses using the information we provide within our website. The past successes or failures mentioned in the content of our website are not indications of future success or loss.

High risk warning: forex trading has the potential for very large rewards, but equally large potential risks. The high degree of leverage in forex trading and investing can work against you just as it works with you. To begin trading and investing in these markets, you should be aware of the risks and willing to accept them as forex trading involves substantial risks, making not a suitable fit for all investors. Any of the content provided on elite forex trading is given to you purely on a general advice basis and for educational purposes. We do not accept the liability for ANY loss or damage because of the information provided within our site, whether they have arisen directly or indirectly from using or relying on our website’s content. Please remember that past success and past loss is not indicative or future results.

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Starting to trade in forex and in general trading in any other financial market, is today easier than ever. And it is that access to brokers where to trade with all kinds of financial instruments requires little more than an internet connection. But often new traders forget that the available trading capital will affect their trading capacity. You often want to start with a small account and live from trading in a matter of a few months.

From a strict point of view, to operate in forex you need a computer, internet connection and amounts as low as 1 USD. Yes, you read that right, there are brokers that allow you to open trading accounts with just one dollar. But what can you do with a one dollar account?

The minimum recommended amount

In a very general way and without taking into account many factors, some amounts where the vast majority could fit would be 25 thousand dollars to trade in the stock market, for futures between one thousand and five thousand and to start in forex it would be enough with $500.

For me the numbers given in the previous paragraph do not make sense if they are not accompanied by more information and some calculations. Before continuing, always be very clear about these premises:

Invest only the money you do not need for anything else, that money that if you lose it does not mean a sharp change in your lifestyle.

If you have just started, do not start risking all your capital, so you can recover if you lose a lot in your trading account and start over.

Only start trading with real money after you have trained and practiced at least few months.

To calculate the money you will need to start trading, you must first meet the minimum to open an account in the best forex broker you have chosen, that is, meet your initial margin requirement. To this amount you will have to add the amount that contribute factors such as your profit objectives, your trading style and trading conditions of the broker, commissions, margin required before a margin call, etc.

What I propose is to make a business plan, trade in forex is that after all, isn’t it? You have to have a plan in which your goals are set, how are you going to accomplish your goals and what are you going to do in case of possible setbacks (which will surely arise). Having a plan does not guarantee success at all but it is much better to have it than not to have it, this point should be very clear.

Practical example

It is assumed that, before switching to real money trading, you have been training and practicing for at least one year with your trading system, so you must have data on it, such as maximum expected drawdown. Suppose the maximum drawdown you expect is 30%. Would a $ 500 account be enough if my broker only allows me to trade with at least 1 lot? If we review the lesson about the pip and the lot we will see that a standard lot is 100 thousand dollars.

When trading with 1 lot in pairs such as EUR/USD, the profit is $ 10 for each profit pip, and the loss is $ 10 for each lost pip. Thus, without counting the commission pips that the broker takes, with a movement against only 30 pips, $ 300 would have been lost, which has doubled the maximum drawdown (30% of 500 is 150), it would have lost more than half of the money in the account and would be at the limit of a margin call. Obviously for this case 500 USD would not be the amount of money needed to start as it would be too risky for the trading conditions of the broker and the trading style of the trader.

Assume now the same previous conditions but with a minimum volume per operation of 0.1 lots. To reach the same dire point, 300 pips of loss would now be necessary. And with 150 pips of loss we would have reached the maximum drawdown of our trading system. This situation is already much more benevolent. And 500 dollars can be worth as a starting capital or maybe not, it depends on the objectives and other characteristics of the trader’s trading style. If I put my specific case, they would not be enough at all since 150 pips is my stop loss in each order so losing a single operation would be at my maximum drawdown and losing too much money with respect to the total of the account, and with 2 or 3 three consecutive losing operations would be out.

Now suppose that for a trader in question 500 dollars are, as we saw before, a sufficient amount of money to start. And so as not to get too caught up, he decides that instead of 500 USD he will open his account with 1000 USD and will operate with 0.1 lot. In this situation you will be more relaxed about the drawdown, the margin call and this whole topic. But now he stops to think about his goals. It turns out that trading on paper during your training comes to forecast average earnings of 6% per month. But he wants to earn at least $ 1,000 a year. 6% of 1000 are 60, which multiplied by 12 would be 720 dollars. With these initial 1000 dollar numbers they would fall short to meet their objectives, adapt to the trading system and the conditions of the broker. To accomplish all this you would need at least $ 1,500 initial.

I hope it was clear what i was trying to expose. You may need as much money to start trading as the joint needs of your trading style, your goals, the broker’s conditions and your own resources require. With these factors in mind, you can now look closely at the minimum amount to start forex trading. Hopefully these tips have been useful and help you to take appropriate considerations.

The minimum capital required to start day trading forex

Martin child / getty images

It's easy to start day trading currencies because the foreign exchange (forex) market is one of the most accessible financial markets. Some forex brokers require a minimum initial deposit of only $50 to open an account and some accounts can be opened with an initial deposit of $0.

And unlike the stock market, for which the securities and exchange commission requires day traders to maintain an account with $25,000 in assets, there is no legal minimum amount required for forex trading.

But just because you could start with as little as $50 doesn't mean that's the amount you should start with. You may want to consider some scenarios involving the potential risks and rewards of various investment amounts before determining how much money to put in your forex trading account.

Risk management

Day traders shouldn't risk more than 1% of their forex account on a single trade. You should make that a hard and fast rule. That means, if your account contains $1,000, then the most you'll want to risk on a trade is $10. If your account contains $10,000, you shouldn't risk more than $100 per trade.

Even great traders have strings of losses; if you keep the risk on each trade small, a losing streak can't significantly deplete your capital. Risk is determined by the difference between your entry price and the price at which your stop-loss order goes into effect, multiplied by the position size and the pip value.

Illustration about starting day trading forex

Pip values and trading lots

The forex market moves in pips. Let's say the euro-U.S. Dollar (EUR/USD) currency pair is priced at 1.3025. That means the value of one euro, the first currency in the pair, which is known as the base currency, is $1.3025.

For most currency pairs, a pip is 0.0001, which is equivalent to 1/100th of a percent. If the EUR/USD price changes to 1.3026, that's a one pip move. If it changes to 1.3125, that's a 100 pip move. An exception to the pip value "rule" is made for the japanese yen. A pip for currency pairs in which is the yen is the second currency—called the quote currency—is 0.01, which is equivalent to 1 percent.

Forex pairs trade in units of 1,000, 10,000 or 100,000, called micro, mini, and standard lots.

When USD is listed second in the pair, as in EUR/USD or AUD/USD (australian dollar-U.S. Dollar), and your account is funded with U.S. Dollars, the value of the pip per type of lot is fixed. If you hold a micro lot of 1,000 units, each pip movement is worth $0.10. If you hold a mini lot of 10,000, then each pip move is $1. if you hold a standard lot of 100,000, then each pip move is $10. Pip values can vary by price and pair, so knowing the pip value of the pair you're trading is critical in determining position size and risk.

Stop-loss orders

When trading currencies, it's important to enter a stop-loss order in case the value of the base currency goes in the opposite direction of your bet. A simple stop-loss order would be 10 pips below the current price when you expect the price to rise or 10 pips above the current price when you expect the price to fall.

Capital scenarios

$100 in the account

Assume you open an account for $100. You will want to limit your risk on each trade to $1 (1% of $100).

If you place a trade in EUR/USD, buying or selling one micro lot, your stop-loss order must be within 10 pips of your entry price. Since each pip is worth $0.10, if your stop loss were 11 pips away, your risk would be $1.10 (11 x $0.10), which is more risk than you want.

You can see how opening an account with only $100 severely limits how you can trade. Also, if you are risking a very small dollar amount on each trade, by extension you're going to be making only small gains when you bet correctly. To make bigger gains—and possibly derive a reasonable amount of income from your trading activity—you will require more capital.

$500 in the account

Now assume you open an account with $500. You can risk up to $5 per trade and buy multiple lots. For example, you can set a stop loss 10 pips away from your entry price and buy five micro lots and still be within your risk limit (because 10 pips x $0.10 x 5 micro lots = $5 at risk).

Or if you choose to place a stop loss 25 pips away from the entry price, you can buy two micro lots to keep the risk on the trade below 1% of the account. You would buy only two micro lots because 25 pips x $0.10 x 2 micro lots = $5.

Starting with $500 will provide greater trading flexibility and produce more daily income than starting with $100. But most day traders will still be able to make only $5 to $15 per day off this amount with any regularity.

$5,000 in the account

If you start with $5,000, you have even more flexibility and can trade mini lots as well as micro lots. If you buy the EUR/USD at 1.3025 and place a stop loss at 1.3017 (eight pips of risk), you could buy 6 mini lots and 2 micro lots.

Your maximum risk is $50 (1% of $5,000), and you can trade in mini lots because each pip is worth $1 and you've chosen an 8 pip stop-loss. Divide the risk ($50) by (8 pips x $1) to get 6.25 for the number of mini lots you could buy without exceeding your risk. You would break up 6.25 mini lots into 6 mini lots (6 x $1 x 8 pips = $48) and 2 micro lots (2 x $0.10 x 8 pips = $1.60), which puts a total of only $49.60 at risk.

With this amount of capital and the ability to risk $50 on each trade, the income potential moves up, and traders can potentially make $50 to $150 a day, or more, depending on their forex strategy.

Recommended capital

Starting out with at least $500 gives you flexibility in how you can trade that an account with only $100 in it does not have. Starting with $5,000 or more is even better because it can help you produce a reasonable amount of income that will compensate you for the time you're spending on trading.

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We are all aware that forex refers to a currency market where traders buy currencies and sell them. For a trader to earn some money at forex, they should have the currency of a country, which they can exchange for another country’s currency. As a result, a trader will either get a profit or loss.

In forex trading, you can decide whether to invest some money or trade without a deposit. Top forex brokers do provide a free no-deposit bonus to traders. In such a case then you can trade at forex with no money.

Whether you opt to trade with or without an investment, the truth is that each case has its own risks. This is true especially if you don’t have the necessary experience and knowledge on how to trade in forex. That is why you should learn some basics on how to start forex trading business with no money.

Forex has a daily trades amounting to 5.3 trillion dollars, making it the top fiscal market across the globe. This alone poses a great chance for traders to earn huge profits. Trading without an investment is risk-free in itself. This article is for anyone who desires to take this path.

Here’s how to begin trading in forex without money

How To Start Forex Trading Business With No Money

First, you must have a clear understanding that it is not possible to make high profits in forex with no investment. If you desire to be a serious trader and want to gain huge profits in the long-run, then you should open a trading account and deposit some money on it.

Nonetheless, you can still earn money at forex with no investment but the profit will not be as big. The best part with no investment trading is that you’ll not risk your money.

Trading forex is in itself risky – that’s why many people shy away from it. There are many scams assuring people that they can earn millions even if they have no capital investment. Don’t let these scams fool you – even a bit!

Luckily, you can earn money at forex without a deposit. The thing is that it will take a long time to accumulate as much as you would desire.

Forex trading with zero capital using demo accounts or with no-deposit bonus

Every reputable forex broker will give traders a chance to open new demo accounts. Such an account will let you use virtual currency to trade at forex. But you cannot withdraw this fund as it belongs to your broker, or you can try forex no-deposit bonus and you can withdraw if you make a profit.As an inexperienced and new trader, it is advisable you start with a demo account or no deposit bonus. If you so wish to take this path, then, just be aware that you can make a profit. But it’s a great starting point to learn how to trade when you invest real money.

Affiliate programs

Besides opening a demo account, you can trade using affiliate programs. This is a chance to make extra money in forex without trading as per se. Just select a broker and promote them. As a result, you’ll get a commission if you happen to attract people. This is a current trend for traders to earn money with no investment.

Participating in an affiliate programs entails attracting new clients. These clients must be willing to trade in forex. That’s how you’ll earn your bonus. Affiliate programs have different terms and conditions. Some will allow you to receive bonuses whether or not the client trades. Therefore, it’s great to check out the terms for your affiliate program and see how much you can get.

Once you attract a client, your broker will automatically transfer your bonus into your trading account. Here you have an option to withdraw the money or trade with it in forex.

Contests

Some brokers do arrange contests for real and demo accounts on a regular basis. Unlike other competitions, the ones in forex are simple. To become a winner, you must boost the income on your virtual account at least several times within the shortest period possible. As a result, you’ll receive money on your real account – as a reward.

Therefore, you can trade at forex with no investment. If you choose to trade using a demo account, then you should increase profits for a specific amount within a specific time period. And you’ll get a bonus on your real trading account.

So taking part in the contest can make you a great trader at forex even if you don’t have an investment. However, for you to be successful with demo contests, you must know how to trade with cryptocurrency pairs. Cryptocurrency is a great asset for a trader to earn high profits due to its volatility.

4. Posts, reviews, and comments on different information portals

Brokers do reward traders who place interesting comments on forex forums. You can also receive bonuses when you participate in forex opinion polls. Similarly, publishing articles and surveys about forex can earn you bonuses on your real account.

Apart from earning money, you can also gain reputation and experience same as that of a professional analyst. Brokers are willing to pay a lot for forex reviews. So you can take advantage and write them some damn good reviews.

The bottom line

Those who make an investment in forex are not the only ones who can gain profit. Even the ones with no money can too. Notably, though, if you want to earn huge amounts of money at forex you should invest money. On the same note, you should have the knowledge and experience of trading in forex.

Nowadays, people can trade with no capital at first and open real accounts later on. And with time, they become successful in trading. As a newbie in this field, it is advisable you begin the first step and proceed as you gain experience/knowledge.

Hopefully, you now have a clue on how you can start forex trading business with no money at all. You can use either of these options as a chance to gain experience on how to trade in forex without risking your money.

How to start trading forex (4 steps)

Welcome to the world of forex. There might be many reasons why you are reading this article. It could be that your friend or acquaintance mentioned about how they trade and perhaps even make a living by trading forex. Whatever your reasons may be; this article will give you an overview of the forex markets and how to start trading forex … and perhaps make money for yourself.

Step 1. What is forex?

Step 2. Learn forex basics

Step 3: find a forex broker

Step 4: start trading

Step 1. What is forex?

Forex, or foreign exchange is an unregulated market, also known as OTC (over-the-counter) and is the biggest market with average daily turn-over that runs into billions. It is even bigger than the US stock markets. Although due to its OTC nature, no one can really give the correct numbers as to the forex turnover. But nonetheless, forex is indeed a big market and thus allows many market participants. From your neighborhood bank to specialized investment companies, to your friend; the forex markets always offers a piece of the action whoever you are and wherever you are (even from your home).

The basic concept of trading forex is very simple. You trade or speculate against other traders on the direction of a currency.

So, if you believe that the euro is going to rise, you would BUY the euro, or SELL the euro if you think the euro would fall. It’s as simple as that.

Step 2. Learn forex basics

Before you get ready to deposit your funds and start trading there are some important points you must understand, each of which are outlined below.

Forex brokers: in order to start trading forex, you will need to trade with the help of a forex broker. There are many forex brokers out there today who allow you to open a forex trading account for as little as $5. The forex broker is the one who facilitates your buy and sell orders and also allows you to research into the markets (also known as technical or fundamental analysis) to help you make more informed decisions… and of course allows you deposit more funds or withdraw your profits when you want to. ( click here to see our forex brokers rating )

Trading platform:you need a trading platform from which you can place your trades, which are then sent to the broker for settlement. Also, a trading platform is essential for you to conduct your technical analysis and also to see the current market prices. Most retail brokers offer the MT4 (short for metatrader 4) trading platform, which is free of cost. You can also open a demo trading account and practice trading with virtual money to gain the experience required before trading with real money.

Forex trading hours:while you might have heard that the forex markets never sleeps, it actually does. Firstly, you won’t be able to trade on weekends (saturday and sundays). But for the rest of the week, the forex market operates 24 hours a day. This is due to the fact that forex trading is global. At any point in time, you will always find an overlap of a new market session while the previous market closes. What time of the day or which market session you trade plays a big role if you are an intra-day trader or a scalper. This is another vast topic, which we will cover at a later stage. ( click here to learn more about forex trading hours . )

Now that you have a basic overview of the forex markets, here are some final pointers to remember before you start trading for yourself.

What is a pip?:pip is a measure of change in a currency pair’s value and is the 5 th decimal. For example, if EURUSD changes from 1.31428 to 1.31429, the change is denoted as 1pip (1.31428 – 1.31429 = 0.00001). When you trade, the more pips you make, the more profit you have. Ex: buying EURUSD at 1.31428 and selling (or closing your trade) at 1.31528 would give you 100pips in profit. ( read more about forex PIP )

Reading quotes: forex quotes are presented in a bid and ask price (both of which vary by a few pips and from one broker to another). The bid price is the price at which you can buy and the ask price is the price as which you can sell. So, a EURUSD quote would look like this 1.31428(bid)/1.31420(ask).

What is a spread?: spread is nothing but the difference between the bid and ask price. So in the above example, for 1.31428/1.31420, the spread would be 8 pips. ( read more about forex spread)

What is a leverage?: leverage is the amount by which you can request your broker to magnify (or increase) your trade value. Leverage is often quoted in ratios such as 1:50, which means that when trading on a 1:50 leverage, your $100 is magnified to $50000. Leverage is a big topic in itself and it is recommended to read this article to learn more. Leverage is important both in terms of making profits as well as managing risks and therefore, your trades.

What is a lot?: A lot is a unit by which you place your trade. In financial terms, a lot is also referred to as a contract. There are preset lots (or contract sizes) that you can trade. For example a standard lot is nothing but 100,000 units (known as 1 lot). ( read more about lot)

Reading charts: the ability to understand and read the charts is very essential to trading. Depending on your approach, you can choose between a line, bar or candlestick charts and trade accordingly (for example trading based on candlestick patterns). ( read more how to read forex charts)

Placing orders (how to buy and sell): in forex trading, it is possible to either buy or sell any currency pair. Most trading platforms, give you this option. You buy when you think that price will go up and you sell when you think that price will fall. There is a common terminology used in forex trading, which is buy low, sell high; which is an important point to remember. ( read more how to place orders with MT4 )

Order types: besides buy and sell, another point to remember the types of orders. There are two basic order types: market orders and pending orders. When you click on ‘buy’ or ‘sell’ you are basically buying (or selling) at the current market price. A limit order on the other hand tells the broker that you want to buy or sell only at a particular price. ( read more about types of forex orders)

Step 3. Find a forex broker

forex how to start - Find a Forex Broker

As mentioned, there are many forex brokers today and therefore it can get confusing on how to choose the forex broker that is right for you. To briefly summarize, remember the following points while choosing a forex broker:

Look for a forex broker that is regulated

See if the forex broker offers a minimum deposit amount

What is the leverage that the broker offers

What is the minimum contract size that you can trade

Bonuses and the terms and conditions (see on our site list of forex deposit bonuses and forex no deposit bonuses)

Deposit and withdrawal types as well as the terms and conditions

Trading methods that are allowed by the broker

We can also help you choose a forex broker by reading our article how to choose forex broker

Step 4. Start trading

Finally, now that you have selected a forex broker to trade with it is recommended to first open a demo trading or a practice account. Most forex brokers offer unlimited demo trading account (but will be deactivated if not used for 30 days). This is a good way to get acquainted with the forex markets and also help you to understand your trading style (scalper or intra day trading, swing trading, etc) and approach (fundamental or technical analysis). You can search for various trading methods and systems or you can develop one yourself when you have a good understanding of technical or fundamental indicators.

Conclusion:

Forex trading is one of the most active and dynamic ways to trade the financial markets. At the heart of everything, it is the basic fluctuations in currency values which drives everything else. Learning to trade forex and understanding the forex markets can give a good foundation to trading other markets such as derivatives or equities.

What is A forex trader

Congratulations on taking the first step of an exciting journey.

Learning about what is a forex trader could be a defining point in your life.

You may be curious about what a forex trader is now, but this very article could spur you on to becoming a forex trader full time.

Today you are going to learn exactly what is a forex trader and what it takes to become one.

Not only that but we will get you on the right track and provide some tips and steps you must understand before committing to forex trading.

So make sure you read on until the end for the bonus content…

With that being said, let’s get this answered by an expert:

What is A forex trader definition

So, what is a forex trader definition?

Wikipedia describes a forex trader meaning as:

“A [forex] trader is a person or entity, who buys and sells financial instruments such as stocks, bonds, commodities, derivatives, and mutual funds in the capacity of agent, hedger, arbitrageur, or speculator.”

In other words, the forex trader meaning is:

It’s a person who actively takes part in speculating in the forex markets, specifically. Forex traders are people who invest in the markets but specialise only in the currency markets.

Many people shoehorn forex traders as a single type of ideology of speculating the markets.

The definition of forex trader is too broad when in reality there are many sub-categories.

That is the beauty of forex trading.

You can literally manipulate this life skill and mould it to suit you.

Don’t want to focus on the markets all day for 5 days straight? Stay away from scalping and choose to trade long term – picking trading ideas that could span out over the next few months. These people tend to incorporate economic news and data points more.

Don’t want to wait a few months to potentially make a profit? No problem. You can focus on trading in a smaller time frame.

You see, thanks to the global economy and now that we are connected via the internet; the forex markets are open for 24 hours a day between monday and friday.

Ideally, our definition of “what is A forex trader definition” would be:

A person who speculates on the forex markets trading different currencies using their own funds.

A forex trader can take advantage of the currency markets by choosing exactly how they want to trade, whether it’s short-term or long-term, using automated trading strategies or manually trading themselves for them to generate positive returns in the markets.

Now you have a grasp of what is forex trader, it’s time to find the differences between another type of trader:

Forex trader vs stock trader

Following on from the definition – it is important to highlight what specifically is the difference between a forex trader vs stock trader.

Many people believe they are the same thing.

When technically it’s true because you can be both – you are not limited to being a forex trader or a stock trader.

Many people choose forex due to the lower barrier of entry (but this can be dangerous to beginners), lower costs and flexible trading times.

On the other hand, people with more starting capital tend to focus on becoming a stock trader because they believe they can read and understand a company better than an economy.

Look at it this way, it’s easier to understand what apple does as a business, how they are doing, and where they are going than it is understanding what the ISM data points are telling you in the US.

Reasons why people choose to become a forex trader vs. Stock trader

As touched on before, the main difference between the two “types” of traders is that they choose to specialise in one asset only.

To be honest, you’d want to be able to trade all assets available.

Forex

Stocks

Indices

Commodities

Bonds

Limiting your style may make it more comfortable to trade or seem like you don’t need to be spinning as many plates but being able to understand other assets will explode your knowledge and ability to profit in any trading environment.

The core concept of a forex trader is to be adaptable to any situation.

The argument of which is better between forex trading vs stock trading is quite redundant because I believe you should be both.

That being said, the main reasons why people choose to become a forex trader vs stock trader are:

Lower barrier of entry – you can get leverage to trade forex, which allows you to control an asset for a smaller deposit. Think about putting a deposit down on a house, you get to own the house in your own right, but you borrowed from the bank to pay for the house in full.

Quicker trading opportunities – forex is one of the most liquid assets a retail trader can take part in. As there is more liquidity, it means prices are easily matched and trades are executed fast. This allows people to trade during the day easily.

Lower trading costs – unlike stock trading, there is no commission on transactions + stamp duty (in the UK). You only pay the spread which is the difference between the bid/offer price.

Pros & cons of being a forex trader
pros

Take advantage of smaller market movements

Lower costs associated with forex trading

Lower timeframes tend to be more interesting to follow via technical analysis

Susceptible to overtrading

Leverage if not managed properly can lose more money than deposited into a broker account.

Hard to trade without the correct forex education.

Pros & cons of being a stock trader
pros

Easier to understand as you can follow the company specifically and view their details to make an informed decision.

Ownership of shares – you may receive dividends and also voting rights.

Generate a portfolio for income

Higher fees

Can only trade during the market hours which closes each day.

Market news outside of trading hours can make the price open severely down, or up, depending on the impact of the news.

Whichever you want to be, at the end of the day it is down to preference. If you want a head start, you can read our free guide on forex trading for beginners.

Forex trader requirements

What does it take to become a forex trader?

Firstly, it is important to figure out if being a forex trader is for you.

The best forex traders are action takers…
it’s not a hobby to dabble your hard-earned money, spending time potentially chasing losses because you are unwilling to put the work in. Spending more money education from overpriced vendors – more money on education than you are willing to risk.

If you are willing to pay for a course worth £5k, yet hesitant to put £5k into a trading account then you have your reasons skewed.

The most forex trader requirement is the ability to take ACTION.

If you are someone who wants to read until your eyes bleed about how to trade, you will be at square one for eternity. You need the internal instinct within to have courage and belief in yourself to take action.

At the end of the day, if you are unable to take action (or are scared to), you will never be able to claw back the money spent on trading education or grow your capital.

The best forex traders invest what they can afford…
one key aspect we talk about here is to ensure that you can afford to lose the capital you want to risk.

One concept devised by john templeton and promoted heavily by tony robbins is the three-bucket asset allocation:

Security bucket – safe investments, fixed income, small but reliable growth.

Growth bucket – high-risk investments that have unlimited growth potential; ideally you’d be using this bucket to invest into forex IF you are confident enough.

Dream bucket – A bucket to save and spend on large purchases e.G) once in a lifetime vacation, new house, new car.

If you have capital saved for growth, by that we mean that all your bills are covered and you have money saved up for a rainy day/emergency, then you should consider becoming a forex trader.

With certainty knowing that if things turn out badly, you will not be affected by it. This will help you become a much better forex trader.

The best forex traders know that they are in the business of risk…
this might sound obvious, but no one – and I mean no one – wants to lose money.

Forex traders know that they HAVE to lose money and WILL lose money at some point.

I still get surprised when someone says they want to invest and learn to trade forex but don’t want to lose any money.

These people are unsuitable to trading.

One of the requirements is to be able to accept the losses and move on as if nothing happened. As if it’s just a normal course of action. If you can’t do that then you violate these requirements and hold yourself back as a trader.

The best forex traders are curious & want to learn more…

Learning how to trade is just a foundational requirement for becoming a forex trader.

In fact, in order to adapt and move forward for any uncertainty, you must want to learn about the economies.

It may sound boring, but I’m sure you’d agree that if you knew where an economy was heading 18 months before it arrives, 99% of you would like to know – right?

The most successful traders read the data points and build their positions around the overall macro trend. This allows the fundamentals to help deliver and drive their profits home – with less stress!

Forex trader common setups

Most forex traders that take it serious work from their desktops. Now that’s not to say that trading via the smartphone or tablet is bad – or they don’t take it seriously – it’s just the amount of data, chart setups and incoming news makes the desktop king.

Nowadays, with the speed of the internet and the ever-improving technology to display trading terminals on – you can find the most common platforms and data streamed to any device.

The most common is still desktop setups with 2+ monitors. This is because most desktops are fast and have enough screen estate to allow trades to quickly absorb as much information as possible at a glance.

Whereas on smaller screens, the screen sizes are smaller and charts are squeezed in making it more difficult to view the bigger picture as quickly.

At the end of the day, speed is king to decision making in the markets.

Forex trader common starting capital

The most common starting capital is actually quite small – around £1-5k initial starting capital.

Many beginners start with smaller balances, around £200-500 – but they soon find themselves topping it up with more. Especially if they are losing their money. Furthermore, they find themselves unable to trade all the opportunities they see because all of their capital is tied up.

Remember, not every trade is going to be a winner!

Ideally, you want to start with £10k-25k to start with. This will be ample enough for you to take trades and grow your account steadily over time.

Common forex trader platforms

The most popular forex trader platform is the metatrader 4 platform (click the link for a complete rundown).

Metatrader 4 is available through most forex brokers for free. It provides a terminal-like interface, customisable charting, customisable indicators and is super easy to use.

(if you are looking for a forex broker, read our review here)

How to become A forex trader

Firstly, let’s define exactly what is meant by the term “professional trader” as there are two types:

The first type is someone employed to execute trades on behalf of an institution and must be regulated with the appropriate qualifications.

The other, a more common form that people think about, is when you are trading your own account(s) and solely rely on profits generated from forex trading to earn a living. Below we’ll outline the core principles required to making it as a forex trader.

What does it take to become a professional forex trader?

To become a pro, you need to be good enough at generating returns frequently and reliably. This isn’t to say it’s for everyone.

The key difference between a retail trader and a professional is that the professional treats trading like a business.

You must also have a sizeable check of capital to make it worth your time. Starting with £1k is not going to make you a professional.

If you want to do this full time, then you also have to realise that your performance will be impacted every time you withdraw for income/bills/spending money. Which is the short-term could impact you.

For example, professionals would use a metric known as kelly’s criterion to easily scale their trades up when they are performing well – yet scale their trades down when they are underperforming.

As discussed, you need to be business-minded to able to stay concentrated on the markets for several hours a day.

Not only that, but you also need a passion for this.

Trust me, if you have no passion for trading, the markets or the data points – I can imagine it’s an absolute drag!

You need to be resilient to the losses and certain in your own ability to overcome them in the next few trades.

Most professionals in institutions have a 50% strike rate on their ideas. If you are above that, or near that level. You are doing exceedingly well.

For you to be a serious professional you need a sizable amount to start with. Not only that but enough money outside your trading account to cover your bills.

To ideally start considering professionally trading forex you want at least £50-100k.

However, there are always exceptions in this case. For example, you can be good enough with £10k to start with whilst outside of trading you have another job or receive a side income.

The right education is key.

To be honest, you can learn an awful lot about trading for free.

At least, all the core principles to look out for and how to read the charts effectively enough to understand where the market is and where it is heading towards.

Trading isn’t rocket science, but it requires the best forex course and education to even have a chance of your capital surviving, let alone your mental wellbeing.

Losing money will have a negative effect on you.

We recommend to trading/going live after successfully growing a demo account by 50-100%+ with the capital they would actually deposit into an account. Not only that, logging every trade with a rationale behind it to log it to memory.

Once you’ve received the right education and traded on a demo account until you are consistently profiting – then you have the solid foundations of being able to trade professionally.

Following these simple tips, you will be on your way of fully understanding how to become a forex trader in no-time.

What is A forex trader: tips to make you succeed

Tip 1: focus on 3 currency pairs only to begin with – EUR/USD, GBP/USD, JPY/USD. Why these pairs? Because not only are they majors but all the other crosses are forex pairs that correlate. So you know that if the EUR/USD is rising, then you can expect the GBP/USD to rise and the JPY/USD to fall.

Tip 2: practice using past data – we have a trading simulator that plugs into the MT4 platform that allows you to practise with real market data and in real-time, using past data. This is super useful as you can review trading ideas in real-time, speed up the markets on demand, to see how it plays out. This alone will speed up your learning.

Step 3: only use the amount of money in a demo account as you would in real life. Only going to deposit £1,000? Use a demo account with £1,000. That way you limit yourself from trading bigger than you would in real life, plus it would make it slightly more realistic.

Tip 4: migrate from a demo account to a live account and start SMALL to begin with. When you finally deposit to a live account, start with the smallest trade size and work up AS you profit.

Tip 5: stop looking for the holy grail of trading. All you need to know is the market structure, supply and demand [link to s&d level course] levels and price action.

Tip 6: TAKE ACTION. Don’t be a tyre kicker and want to learn EVERYTHING before you start trading. Get the right education and you’re halfway there. The rest you learn by doing!

Conclusion

Now you have managed to learn and grasp some of the major concepts of what is a forex trader, as well as getting some tips to help shed a light around the subject.

One of the main things you must ask yourself is:

If you don’t want to work long hours, research economies and look at a computer screen (or 4) per day then trading may not be for you.

Be honest with yourself, as it’s not as luxurious as people make it out to be.

However, if profiting from news events or price action patterns sounds fun – then you should certainly continue your journey and learn more about trading forex.

Minimum capital required to start day trading

One of the unique advantages of the forex market is that traders do not need huge amounts of capital. Unlike the stock markets, where traders need to put up huge amounts as collateral and also account for market valuations, the forex market works differently.

Thanks to leverage and day trading, traders with just an average amount of capital to risk can start trading forex efficiently. Of course, the success or failure from trading depends on a number of factors. Trading capital is just one of the many variables.

For the most part, in any form of speculation or investing, traders need to have adequate capital. Trading capital ensures that traders have enough capital to allocate for their open positions and also have enough capital in margin for the positions that they are in.

This begs the question as to how much capital is required to start trading. If someone tells you that you need a specific amount to trade forex, then they are misleading you.

The amount of capital required to trade forex depends on a lot of factors, such as the expected rate of return, your risk profile, and your trading strategy. Of course, you can trade forex with 100,000 USD, and you can also trade forex with just 1,000 USD. But what is the ideal amount to trade?

In this article, we will explore different ways to help you decide on the minimum capital that is required to start trading forex. Note that this is highly subjective and can differ from one person to another. The answer also depends on a number of factors as touched upon earlier.

Most forex brokers have a very low minimum requirement when it comes to opening a forex trading account. On average, you can trade with just 100 USD in starting capital.

In some cases, forex brokers also allow you to open a micro or a cent account which allows you trade with just 1 USD. However, expecting to grow such an account is impractical.

Risk management and forex day trading requirements

When it comes to trading, the principles of risk management must be adhered to. This means that traders should follow the rule of thumb and stick to the one percent principle.

The one percent risk management principle states that traders should not risk more than one percent in their trading at any time. This one percent can be either allocated to one trade or to a series of trades. The bottom line being that no matter whether you have one or multiple positions, the risk should not be more than one percent of your account.

This makes an important point. For example, if your trading capital was just 100 USD, that means you should not risk more than 1 USD per trade. Is that possible? It is, when you trade micro lots. However, trading micro lots can be difficult to trade psychologically.

Trading with just 1 USD in risk can mean that at best you can make 2 USD if you follow the 1:2 risk reward setup religiously. However, that is not often the case. Traders can grow impatient and eventually make the mistake of risking more than the one percent that they were supposed to.

Thus, from this, we already know that trading with 100 USD and attempting to be successful will take a lot of work and patience, something which many beginners in trading lack and can lead to mistakes that could have been avoided in the first place.

So, does this mean that traders can trade with 1,000 USD? In this case, your risk once again is limited to 10 USD. While it is manageable, the amount of profits or returns you make is also the same. When you follow the 1:2 risk reward setup, it means that while you risk one percent, you aim to make two percent returns.

This looks good on paper, but if you crunch the numbers, you will see that in reality you are risking 10 USD and making a profit of 20 USD. For traders who dream about building a bankroll quickly, this can mean having to overcome some psychological barriers.

How much money do I need to start forex trading?

There is no standard answer to this question. However, traders should focus on how much they expect to make in returns when risking their capital. A good way to start is to look at the risk-free rate of return.

The risk-free rate of return is the interest rate that is gained on an investment when there is no financial risk or loss involved during the period of time.

Typically bonds come into this picture, especially those that are risk free. Of course, the downside to risk free is that the rate of return is very small. In financial markets, the simple concept is that the more you risk, the more rewards you can get. However, traders should not blindly follow this principle but should apply some subjectivity to the matter.

In order to determine the amount of money needed to start trading forex, the first step is to estimate the expected rate of return on your investment. An average number is around 2% - 5%, with the latter being an optimistic estimate on the returns.

Thus, from this starting point, you can then go into calculating the amount of money you want to invest. However, bear in mind that when you allocate your capital to forex trading, it needs to be an amount that you can truly risk.

Many traders make the mistake of trading based on their credit card funds or other money, which eventually leads to large financial losses. Therefore, you should never trade with money that you cannot afford to lose. Risk is an important factor in financial market trading.

The next step is to understand the leverage that you want to use. Leverage can help you to magnify your positions. But if not used wisely, leverage can quickly lead to losses as well. Leverage and risk management go hand in hand and this is how you can determine your trading capital.

Focusing on the lot size can also help. Typically, the broker will give you the margin requirements when trading on leverage. Thus, you need to ensure that you have enough funds to account for the margin requirements and have additional funds in your account to account for the market valuation.

Say, for example, if your broker requires 1% of capital for the margin, then this means that you need to allocate not just 1% towards the capital requirements, but you should also have additional funds to cover the risks of the trade.

Capital scenarios for forex day trading

Traders can also build up various scenarios based on the amount of capital they have. For example, you can follow this simple rule outlined in the table below.