How much money to Trade in Forex

Forex Trading

 

One of the most important and difficult questions to answer for Forex beginners is how much money is required to start trading Forex. The reason it is so hard to give an answer is that the question itself points to a lack of knowledge.

Before you find a resolution to this question, you'll need to consider the following:

  • your reasons for trading: is it a primary or secondary source of income?
  • the investment limitations imposed by your Forex broker
  • what you can afford to invest
  • your willingness to take risks

Let’s consider these four factors one by one.

 

Reasons to trade

What has led you to the decision to trade? If you are ready to trade, you should have a clear answer to this question. After all, how can you set goals if you don’t know what you want out of it in the first place?

While some people might have a casual interest in the Forex market and the desire to learn, others might be looking for a whole new source of income. There are massive differences in your approach to trading based on your intentions. If you just want to learn, you can start small with no financial expectations. But, if you want to make an income, you need to have enough money to finance your small beginnings and education, and the motivation to make big decisions.

The psychological implications of how much money you begin with come into play here too. If you are investing large sums, you're more likely to be cautious. If you are investing small sums, you might make rash decisions in the hope you can earn big, quick.

World Federation of Exchanges Report

2012 WFE Market Highlights

Here is the annual report of the Global Organization WFE (World Federation of Exchanges) regarding the year 2012.

World Federation of Exchanges Market Highlights 2012Visit

EQUITY & DERIVATIVES TRANSACTIONS

2012 has proved a challenging year for world exchanges as the volumes of all products traded on WFE members were -22.5% down in equity transactions (USD 49 tn) and -20% in the derivatives transactions (14.9bn of equity and interest rates contracts traded). Cash markets continued to suffer from the relative disaffection for equities; derivatives markets were affected by the continued low-interest-rate environment and the significant decrease of volatility, both factors reducing hedging needs.

OTHER FINANCIAL PRODUCTS

Other financial products traded in WFE exchanges also experienced very sharp declines in turnover value:

• ETFs : -31.6% (USD 7.3 tn)

• Securitized derivatives: -43.3% (USD 652 bn)

• Bonds: -20% (USD 26.1 tn)

MARKET CAPITALIZATION

On a more positive note, the only indicator growing was the market capitalization. After the sharp decline observed in 2011 during the summer, it recovered in 2012 with a 15% growth rate, getting back to its end-of 2010 level. The number of listed companies remain stable at 46 332 (-0.8%).

Equity Markets Capitalization USD 55 tn (+15.1%)