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.