There are two very common questions i'm asked frequently. The first one is on the amount of money one needs to start trading
professionally. The second question is on the amount of money the trader will make from that money. The truth is that answering these questions can be a bit complicated. There is no right answer in this.
In the past, trading was some thing done by the large investment banks, high-net worth individuals, and large multinationals. This is because of three main reasons. One. The capital needed to trade was very high. Second, the technology to trade was not available to ordinary folks. Third, there was not real-time access to information. To get the news on companies, ordinary traders had to wait for the newspaper the following day. Banks and the wealthy money managers had access to this information.
Things have now changed. The technology is available to people from around the world. There are many brokers competing for the same clients. The information on trading is also readily available to all people. The number of companies offering brokerage services has increased. The increased competition has led to more favorable terms to traders. For instance, it is now possible to have an account with less than$500.
To answer the above question, you don’t need thousands of dollars to start your account. Some brokers will even accept $250 as the initial capital. They will then make this more attractive by offering high leverage ratios. Leverage enables a trader to trade more money from his capital. For instance, if you have the $250, it is not possible to buy shares of a company that trades at $300 per share. A leverage ratio
of 100:1 gives your account valuation at $250,000. This means you can buy more shares and therefore make more money.
However, there is a challenge in this. If you have very little amount of money, the chances of losing it are higher than a person who has $1000. An example. Suppose you open a trade and lose 50% of your money. If you had $250, you will have a balance of $175. The other person will have a balance of $500. This means that you will have a very big challenge recovering your money than a person who has $500.
This should not discourage you. If you have very little money, your goal should not be to double it overnight.Doing this will put your account at a very big risk. Your only way out is to open very small trades with the hope of compounding your money in a long period of time.
Your dream of being a trader should not disappear because you don’t have enough money. Instead, you should focus on the little amount you have and make more out of it. A good example is this.Assume you have $500. In one year, you trade perfectly and double the money. Itwill be easy for you to find an investor who will give you more money to trade.If you just gave up because you didn’t have the money, you are unlikely to become a great day trader
Finally, it is important to consider the amount of money you have. As stated before, trading is a risky business where you can make a lot of money or lose it within a short period of time. The fact is that you don’t want to trade with money you urgently need. For example,you should not trade with the money you need to pay bills. This is because when trading, you want to have all your focus on trading, and not the bills you are risking. You should only trade with the money you don’t need urgently.