Trade Capital How To Make The Most Of It!

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.

While some may disagree, brokerage is not something one should overlook. Remember, most brokers charge a flat rate, irrespective of the size of your fund.

The advantage of a large fund becomes apparent when we for example take two traders, each using the same broker and each facing the same fees. While one trader has $1000 to trade with, the other has $10,000. If they are both being charged a fee of $100 per trade, the trader with $1000 would need to make at least 10% in order to break even. The trader with $10K on the other hand, would only need 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.

Likewise, the size of your float is going to have a direct impact on which system of trading you use.

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.

If you want to start trading after having saved up a large sum of money then fine. After all, there’s nothing wrong with planning ahead. However, if you’re considering borrowing the money then you need to be extremely careful. Remember, investing a huge sum of money in a property is not the same as trading, and before you consider taking such a risk, you really need to gain some experience first. Whatever you do, don’t be tempted to fund your trading with credit cards. Instead, gain some experience and then if need be, you can always loan money from the bank.

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.

Part-time trading is ideally the way to go for beginners because it won’t place excessive strain on your finances and apart from that, you’ll have the peace of mind knowing you still have a steady income while you’re learning the ropes.

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.

As I mentioned earlier in this article, nobody can say what an ideal starting amount is because it depends on a wide range of factors. These include, but are not limited to, the amount of money you have available, how much risk you can cope with, and which sort of market you’re looking at. However much you decide to start with, set that money aside as a stand-alone business. Doing it this way will help to prevent you digging into profits which in itself results in one loosing focus.

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

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