I hear this question a lot from aspiring day traders, and the answer really depends on the market you want to trade. For traders who have no idea what markets they SHOULD trade at this point, here's an idea of how much you need for the main markets:
1.) If you want to day trade stocks, then you need at least $25,000 in your trading account.
2.) If you want to day trade futures, then you should have between $5,000 and $10,000 in your trading account.
3.) When trading options, you should have between $1,000 and $5,000 in your trading account.
4.) If you're thinking about trading forex, then you can start with as little as $500 in your trading account.
You should choose a market that matches your trading style, your lifestyle, and your overall goals for trading. Financial considerations are always important, but don't make the common mistake of letting your current financial situation dictate which market you're going to trade.
Remember, as with all things in life, you should first define your goal, and then plan how to achieve it.
If you don't currently have sufficient funds to trade the markets you've outlined in your goals, then start doing something about it now - save more money or put in overtime hours. There are a lot of ways to make a few more bucks, and it's better to wait for the funds you need than to begin trading in a market that isn't right for you and your goals.
For those of you who already have the right amount of money in your savings account, let's talk about the question, "How much money SHOULD you trade?"
Many first-time traders think they should trade all of their savings. This isn't true! To determine how much money you should trade, you must first determine how much you can actually afford to lose, and what your financial goals are.
Begin by determining how much of your savings should remain in your savings account. It's important to keep three to six months of living expenses in a readily accessible savings account, so set that money aside, and don't trade it! You should never trade money that you may need immediately. Unless you have funds from another source, such as a recent inheritance, the remaining amount of money will probably be what you currently have to trade with.
Take a good look at how much money you can currently afford to trade. You don't want other parts of your life to suffer when you tie your money up in a trade, so make sure to consider what these savings were originally for.
Next, determine how much you can add to your trading activities in the future. If you are currently employed, you will continue to receive an income, and you can plan to use a portion of that income to build your investment portfolio over time.
Here are two more important things to remember:
1.) As outlined above, certain types of investments require an initial deposit amount to get started. However, don't get too nervous - this does not mean that you will be risking the whole amount. Many traders are only willing to risk 10% of the initial deposit, and that's okay.
2.) Never borrow money to trade, and never use money that you can't afford to lose! It may be clich, but nothing could be truer!
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