In 2020, there had been a boom in the retail trading sector as more and more people wanted to take advantage of the volatility. According to Bloomberg, the future of finance is a wealth management and retail trading, as the trend is expected to continue into next year, as long as there won’t be a market crash.
Even though there is a focus on the stock markets, Forex trading is among the top activities, especially now that currency volatility is high, as compared to a few years ago. Beginners are still asking how much they need to start trading forex, so clarification on the matter will be necessary.
Online trading available even with little funding
Alongside the multitude of trading opportunities arising across numerous currency pairs, it’s been several years since brokerage accounts can be opened with very little funding. This move had contributed to a large influx of retail traders and enabled access to a broader audience, on top of the traditional financial companies that had enough resources to trade large amounts.
With regards to the title question, the amount needed to start online currency trading will depend on various factors and traders need to consider what are the implications (both positive and negative) when trading on a small or large account. That is why we would like to share a brief analysis of both situations and hopefully, you will be able to assess if you have enough funding for proper currency trading or not.
Trading on a small account
The minimum amount required to open a trading account will depend on each broker’s rules. In most cases, large brokerage houses can open new accounts with as little as $50 or $100. Traders can go on and start with this amount, however, it would be important to take notice of several limitations.
Considering the low amount, even with leverage, they will need to take micro-lots, in order to keep balanced risk management. At the same time, it is not possible to keep more trades open simultaneously, given the available margin will be very low.
Trading on a large account
For traders that can deposit more funds, options increase, given they can trade large amounts, without having to increase risk, and at the same time, building a portfolio of assets and having multiple orders simultaneously, won’t be a problem.
Online trading is like a business and to do it properly, you need to invest your time and money, without knowing for the very start what will be the future returns.
The bottom line
What new traders wanting to know how much they need to start trading forex should consider is it not necessary to have a large account to trade effectively. However, as seen above, trading on a very small account will come with several downsides that will need to be somehow negated to prevent large drawdown and excessive risk-taking. It all comes down to finding the right balance between your personal finances and making sure that FX trading will be done professionally.