“In order to start trading it is necessary to have a lot of money” – I can hear quite often from persons, who loudly think above trading or investments. “What amount you Tomek think it is worthwhile to start adventure in daytrading?” – another question, which for years BeDayTrader.com and Day-Trader.pl readers often ask me. Below you will find my reply to this important question!
How much money do I need to trade stocks
However, at the beginning I will ask you two questions. Questions, which are supposed impose a specific reply:
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What is the purpose of your investment or starting trading more actively?
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What this amount means to you, amount which you want to invest?
Answer those two above questions honestly. Write them down on a piece of paper that will remind you about it – if meantime you will change your assumptions, to approach or perceive of held money. Next start reading farther:
What is the purpose of your trading or investment
I’m not asking here about numbers. Reply that trading is supposed to give profits is as clear as the sun. Let us state – we trade for money and to live better :)). If trading is supposed to help you with faster repayment of debt, to accumulate capital in record time – consider this quite seriously. Trading = risk. At held debts or need of fast collection of money (because e.g. you need better car or longer holidays or simply for life) you add additional risk, which unfortunately you cannot afford.
Measurability of objectives
Let me cite a conversation with my friend, which was not so long ago. I mean the crux of this brief question:
He: Tomek, this stock exchange is worth play?
He: I mean to invest 1000$, and to profit 5000$. Later 10 000$, 15 000$, etc.
He: It not has to be quickly, it may even take two months (!!!!!!!!!)
I: :)))) –> and what’s more to comment
But I will write something more. I think that every person, who starts on the capital markets – must take losses into account at the very beginning. And it is necessary to talk about it and to be aware of it. Counting profits already at the start is bad way. I’m always happy to see a positive approach of beginner traders. However, experience shows that counting still non-existent (but from above established profits) doesn’t end too well. The proper question should be “How much education may cost?”.
What this amount means to you
The answer to that question must be only one – loss of invested on trading money won’t affect my financial situation: I won’t lose money for a rainy day.
If money, which you want to invest is your life savings, waiting for a peaceful retirement, think hard. Whether it is worthwhile to give rise to emotion and stress? If you decide that it is worthwhile – after all you only live once – ok, but do it with your head. Start with smaller amounts and determine how much you are able to lose.
My first, bigger money, which I invested on the stock-market, I earned working in England and Netherlands. In principle, as for the student’s pocket it was a lot of money, this amount was significant for me, but didn’t constitute about my be or not to be. In the end, I was still a student. Altogether it was about 10 000 PLN. The loss, which occurred quite quickly – hurt me, above all because it hit my ambitions. However, loss of this money hasn’t changed anything in my life. It was surplus over my needs, their loss passed over. If I had a plan to earn them in order to buy a car – then losing this money I would feel quite differently. Because I would risk something what had for a specific plan (money was intended for something, and certainly it wasn’t their loss). For me learning of investment was this plan – I was aware of the risk. Although, I didn’t expect that so quickly I would experience it :). It’s an expensive learning, but I think these are the best.
With what amount to start?
You can start even with 0 $. There are brokers, who for launch of the account will give you e.g. 30$ to start. I will say honestly that 100-500$ to learning are good, understanding own weaknesses, testing platforms in the real environment. These aren’t amounts, thanks to which you can proceed to earn a living by trading. But after all, you must start with something. Check out the brokers with whom I cooperate.
If you begin your learning – even the small amount will be sufficient. When you feel that strategies are working for you, there will be profits, and you can increase your amount of deposit. This applies to the markets in general – if you don’t have yet specified plans as for ‘what to trade’.
However, if we regard to U.S. stock exchanges the minimum level of required capital amongst foreign brokers ranges from 500$.
In typical daytrading a minimum capital required by brokers is 25 000$. Amongst proptrading companies and brokers, who avoid PDT regulations (i.e. requirement 25 k$ under daytrading) the amount usually begins ranges 3000$ – 5000$.
Start with the amount, which will be significant for you!
What do I mean by that? If you decide to begin with amount of 1000 PLN with frugality on a level of e.g. 100 000 PLN – you may not feel emotions associated with trading using this amount. If you have 1000 PLN of savings invested on trading, use of the entire amount will be significant for you. In such a case you will certainly more cautiously manage with held positions.
I’m a supporter of starting trading with smaller amounts. If you don’t have experience, but you have a lot of money – it isn’t a good choice to pay the broker at once the entire amount. Unfortunately, often beginner traders aren’t able to reconcile with losses and… start to add to the position by investing more and more funds (since it will return:)) or they held loss until it reaches a level in which they won’t want to wait mentally any longer and will close the position at the worst moment. These are the statistics – implacable.
Calculate how much money indeed will be needed
I like statistics, therefore in a simple way calculate how much money is needed to open the position.
- 100 company shares worth 5$. It’s 100 * 5$ = 500$
- 100 company shares worth 10$. It’s 100 * 10$ = 1000$
- 100 company shares worth 50$. It’s 100 * 50$ = 5000$
Therefore, the minimal requirements of brokers in relation to deposits it one thing. But how many in reality you will open positions is already other thing.
Remember, 70-90 % traders lose
Unfortunately, most of people on the stock-market lose. These are the annual statistics presented by brokers. With it, unfortunately, you can’t argue. Think what to do in order to be in the circle of winners 🙂
Every year trading accounts opens tens of millions of people, who have the same goal as you! As you can see, the competition is big, prepare for this fight.
The stock exchange won’t run away, that’s certain. If you are not financially prepared to take the risk – Wait… devote 1, 2 or 3 years to build your capital under trading. The capital, which is intended to learn trading.
With what amounts you started trading? What were your beginnings? I invite you to discussion.
