Because there are certain fixed costs involved with trading, the more you have to begin with, the easier things will be for you. However, you can start with any amount of trading capital you choose as there’s no ideal figure to go on.
Because most brokers charge a set fee, those starting out with a large fund will find the fee easier to pay. For those with a limited budget, brokerage is something you need to look at closely.
Let’s just say for example, there are two traders who want to enter a trade. One has 00 in their fund while the other has ,000. If these two traders both choose the same broker and that broker charges 0 per trade, the trader with ,000 will only need to make 1% in order to break even after paying the broker fee. The other trader however, has to make 10% in order to cover the broker fee.
Of course you can still start trading if you only have a small float but you do need to realize that you’ll be at a slight disadvantage.
Likewise, the size of your float is going to have a direct impact on which stock trading system you use.
If you’re starting out with a relatively small fund then I’d advise you to look at a long term trading system rather than a short term system like day-trading. Of course, while there are many reasons for me saying this, the most important benefit is that a long term system can be managed with great success even while you continue working in your regular job. As you gain experience and become more confident, then yes, start experimenting with a short term system.
I know that many people start saving money before they actually start trading and of course there’s nothing wrong with planning ahead. On the other hand, there are those who max out their credit cards in order to start trading and for the most part, I certainly don’t advise this course of action. Sure, if you’ve got the necessary trading experience then yes, you can loan money from the bank, just as many others do in order to start a regular business. Remember though, the more money you invest, the bigger the results will be. Win and you win big, but if you loose, you’ll also loose big. The best advice I can give, would be that you start out slowly rather than risking your life savings only to loose everything.
Quitting your regular job for the sake of trading is really not advisable unless you have enough financial backing to support yourself for at least a couple of years. Likewise, it’s not advisable for you to accumulate debt for the sake of trading. If you do, you’ll spend most of your time worrying about repayments rather than having all your focus on proper trading. In fact, Don Miller also covers this in Trading Markets World Meets the Traders when he says the primary interest of new traders should be to trade properly, rather than aiming to make money.
Take a bit of advice from the professionals and start trading part-time only. This way you’ll be gaining some experience and at the same time you’ll start to see some returns coming in.
Short and long-term trading systems:
Short-term systems where trades are typically from one to thirty days require a great amount of expertise and experience, not to mention the fact that they’re extremely time consuming as well. In this case, traders seek to accomplish a high number of wins by taking part in more trades.
Long-term systems involves trades of a month or longer, hence the need for fewer trades. While this means less wins, it also means you require less capital and it’s all round a better system for those who lack trading experience.
As I mentioned earlier in this article, nobody can say what an ideal starting amount is because it depends on a wide range of factors. These include, but are not limited to, the amount of money you have available, how much risk you can cope with, and which sort of market you’re looking at. However much you decide to start with, set that money aside as a stand-alone business. Doing it this way will help to prevent you digging into profits which in itself results in one loosing focus.
As a personal bit of advice, I would suggest you have at least ,000 to start off with, and remember, your trading venture is just like any regular business so please treat it that way.
