In all my years of teaching and training, this could be one of the most common questions I get asked by new traders: “How much do I need to open my account with? Or, “What’s the right amount to start trading with?” We’re talking about money and there is nothing more subjective than – “how much is the right amount of money?”
But just because there is no right answer, I do feel there are some guidelines here to follow. You should be using risk capital, as is the case when opening any business. This means money you can afford to lose. There is risk involved with opening or starting a new business, and this applies to all businesses, not only online trading. However, one of the attributes of this business is that you can measure your results in percentages, and not a dollar amount. This affords us the benefit of starting small and trading your account on a small scale until you are able to show consistent results and only then add to your account size.
So, for example, if you are showing a return of 15% over a given time period, say 3 months and you started your account with $500, your profit will be $75. If you started with $5000 your profit will be $750, and if you started with $100 000 your profit will be $15 000. In each case you made a 15% return. And you can run your business the identical way in all three cases, only your position sizes will be different.
Slow and steady wins the race here!