My Investing Blog

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 capital you choose as there’s no ideal figure to go on and it all depends on trader money management.

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.

To make this a little clearer, let’s take an example where two traders wish to open a trade, using the same broker who charges a fee of $100 per trade. Trader number one has a fund of $1000 while trader number two has a fund of $10,000. In this case, the trader with $1000 will need to make a win of 10% just to break even while the trader with $10,000 only needs to make 1% in order to break even.

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.

Furthermore, the type of trade system you choose will also be heavily influenced by the size of your float.

There are numerous reasons as to why I recommend long term trading systems to those with a small fund. Not only will you be able to manage your trading system successfully while continuing with your regular job, but the amount of brokerage you’ll face will also be considerably less than if you got involved in a short term system such as day-trading.

For someone with little experience, going and investing a huge sum of money into trading is simply being reckless. Admittedly, the more you invest, the bigger your windfall will be if you win but remember, if you loose, you’ll be loosing a large sum of money in trade loss. The reason I mention this, is because many people like to plan ahead by saving a large amount of cash before they start trading for the first time. Likewise, there are those who get swept up in anticipation and end up maxing out their credit cards, which really is something you should avoid. Once you’ve got the necessary experience, you can always apply for a bank loan instead.

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.

Trading on a part-time basis is by far the best approach to take if you’re a beginner because you’ll be in a position where you’ll earn some money while gaining experience at the same time.

The differences between short-term trading and long-term trading:

Short-term system – For the most part these are 1 to 30 day trades. By their very nature, they require you to take part in more trades in order to enjoy multiple wins. However, short-term systems can be extremely taxing in terms of time and emotions and should only be attempted by those with the relevant experience.

Long-term system – In this case trades are at least a month or more. Of course this means fewer trades and less wins but then again, you don’t require as much capital and you don’t require as much skill.

There are numerous factors which determine how much capital you start with such as, how much money you have, how much risk you’re willing to take, and of course, what tools you decide to use. The fact is, there simply isn’t an ideal figure suitable for everyone. The most important thing is, you need to keep your trading capital set up as a separate business once you’ve decided how much you want to start with. This also acts as a barrier against tapping into your profits as you go along.

My advice is that you should start out with a minimum of $10K and remember, treat your trading as you would a regular business.