One of the many concerns of people have about the investment market is how much money they would require to make a debut on this platform? Now one of the biggest traits of the currency exchange market is that it works silently. That means while other trading sectors like the stock market are shouting about how they work; the currency market remains silent during the work in progress. In the stock market, participants initially need to have a deposit of a certain amount before they start buying their stocks. This has led to the misconception that the currency market also requires some deposits in one’s account for being qualified to trade.
However, the scenario is quite different and there’s no legal amount that needs to be deposited for currency trading. Interested participants can begin their trading with an investment of as little as $100 and maintain their accounts with it.
But just because you could start your trades at only $100, doesn’t mean that this is the amount you will start trading with. You need to realize that even though it takes a small amount to invest in this industry, many risky issues are involved with it. Again, investing such a small amount will not bring any changes in your trading when you are looking for making profits.
To give you better picture how profits are made, let us give you an example. Let’s say you have taken long in the EUR/USD currency pair and the price has risen by 2 pips where 1 pip equals 1 Dollar. So, if you invest $100, then for an increase of 2 pip, you will make a profit of $2 for taking a long trade in the EUR/USD pair. So, your final capital will be $102 with a marginal profit of $2. For these reasons you may need to consider some scenarios before you think of investing your capital.
Here are some potential tips you can follow to determine how much capital you would need to risk in your trades.
If you are a day trader then you shouldn’t risk more than 1% of your investment in a single trade. So, if you invest with $1000, the highest risk you can take to lose will be $10. You should stick to your policy until the very end to minimize your losses so that it cannot significantly harm your investment.
Over time, CFD trading in Australia has become extremely popular. Sadly, few traders are able to change their financial condition due to poor risk management plan. Always asses the risks before you open any trade as it will protect your capital in the long run.
Knowing the pip value
Many of the traders get confused when it comes to pip calculation but it is a crucial part of the Forex market. The pip value for most currency pairs is 0.0001. So, if the base currency moves by 1 pip, the value of the currency pair changes. In most cases, 1 pip movement equals a rise or fall in price by $1. However, pip values can change depending on the type of trading lots. Again, the value of a pip varies from one currency pair to another. So, to know your position size and risk, you should be able to count the pip value of the currency pair you are trading with.
One of the biggest problems that the day traders need to face in this market is the risk of facing loss. Even though the opportunity of trading is comparatively higher in day trading, there are also little scopes for the traders to analyze the market properly before executing a trade. Trading without market analysis can be very dangerous when it comes to your investment securities. That’s why, to deal with these problems, traders use stop-loss to limit the time you hold a failing trade for. That way, traders face smaller losses by closing their trades at a pre-determined point.
Being a day trader means you have to keep your eyes open each time you decide to make a trade. You need to be careful that this ever-changing market doesn’t grasp your capital and make you face loses. You can initially begin with an investment of $500 which is the ideal amount for any beginner to gain flexibility in trading. This will help you to produce a more reasonable income and maintain your consistency in trading.