When people look at FX trading they are often confused about the amount of capital that they need. There are a number of aspects that you should consider when you determine the capital that you need. All FX trading ventures are different and the capital that one trader needs is not going to be the amount of capital that another needs. There are some traders who are able to trade with limited capital while other traders would never dream of this.
The Account Minimums
The first point you have to look at when you consider the capital that you need is the minimums that the trading accounts need. There are three different retail trading accounts that you can get and they will vary in minimum deposit. The micro account will be the lowest while the standard account will be the highest. You should only be taking the amount you have to deposit as the base amount of your capital.
A lot of traders make the mistake of assuming that the amount they need to open a trading account is the amount of capital that they need. You often need to have more than the minimum deposit required for your trading account. You have to consider this when you determine the amount of capital that you need.
The Additional Costs of FX Trading
There are a number of additional costs of FX trading that many traders do not consider. If you are not going to use the free training available and pay for a course then you have to consider this. You also need to consider the amount you are going to be spending on additional software. All of the money that you spend on setting up your trading should come from your risk free capital.
The Cost of Trading
Actively trading will often need more money than the minimum deposit of your trading account. If you are opening a micro account then you can do this for $1. You should logically think about the amount of trading that you can do with this amount. The micro lot size is valued at $0.10 which means that you can trade 10 times. You need to calculate the number of trades that you can open with all of the accounts that you are looking at.
You also need to consider how much you are likely to make from the trading that you can complete. If you are working with a micro lot then you are making $0.10 per pip movement. If you get a movement of 50 pips then you are making $5. Is this worth the effort or should you increase the capital that you have so you can trade more?
Consider the Risks of Capital
When you look at the capital amount you need to use money that you can afford to lose. If you do not use this type of capital then you are going to increase the stress of trading. You are also more likely to under trade because you are sacred of losing money. There are many risks that come with the money that you use for capital and you need to consider what these are.