You can start trading with £100
Here’s a smarter way to do it
PLUS: Working out how much to trade on each idea
As you can imagine, a common question from traders starting out is: how much do I need to do this?
And it takes surprisingly little these days to start trading with real money.
Going back a few years, you needed at least £5,000 to open an account.
And there was no such thing as a demo account!
These days, you can open a demo account at most spread betting companies and try trading with an imaginary £10k bank.
And that can be a good idea if you’re brand new to trading. It can give you an idea of how the markets work – and how to place a trade, test out different order types – without risking your hard-earned.
Having said that, the sooner you can start trading with real cash, the better. There’s nothing quite like having some real money on the line to help sharpen your money management skills!
So how much do you need?
Well, these days you can start trading with £100 in your account if you really want to. Especially with one of these brokers that lets you trade at 10p or less per point.
£100 is equivalent to 1,000 points if you’re betting 10p a point. So if you were scalping for 10 or 20 points of profit per trade, with 5 points risk (stop loss), you can afford to lose a lot of trades before you risk breaking the bank. And if you can win more than you lose, you’ll stay in the game.
But of course, it’s going to take a while to make money trading in that sort of size. And if you’re trading on longer timeframes, that’s going to mean bigger stop losses – and therefore a bigger account.
Another way to work out what you need is to think in terms of risk…
I recommend you risk a maximum of 3% of your account per trade (less if possible).
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Now if you can figure out what size your average stop loss per trade is, you can then get to what size bank will accommodate that, whilst fitting the max risk rule.
Make sense? Let’s look at some examples…
Finding your minimum account size Trump’s Next Victim?
There’s something Donald Trump would like to smash into the ground even more than Hillary Clinton… and if he takes the White House by storm on November 8th… he could get his wish almost immediately.
Let’s say I’m using a 100-pip stop loss on average, but with a maximum of 250 pips. And I’m using my rule of risking 3% per trade.
Then what I need to ensure is that my 250-pip loss is NEVER more than 3% of my account.
The smallest trade size I’m aware of (with GKFX and a couple of others I think) is 10p per point.
So let’s use that and multiply the maximum risk of 250 pips by 10p.
250 x 10p = £25 maximum risk per trade.
OK, so we know the maximum stop loss is £25. And we know that we’re only allowed to risk 3% per trade.
It’s a simple calculation now to find my minimum account size.
We just divide £25 by 3%, which gives us £833.
That’s the minimum bank size you should have if you’re betting 10p per point, when your maximum stop loss is 250 points and you want to risk no more than 3% of your bank per trade.
Of course, if you’re betting 10p per point and going for a 500-pip win, then your profit potential on such a trade is £50.
By extension, if you are looking to make £500 off a 500-pip trade, then you’ll need to be betting £1 a point. And that – following the same maths above – is going to mean a bank of £8,330.
Of course, in reality the thing to do is to vary your bet size according to the trade you are doing and the risk (stop loss) on that trade.
If we look at a couple of examples, that should help. We’ll do so based on having a £3,000 bank. So using the 3% rule, you could risk £90 per trade.
Let’s say you had a stop loss of 166 points and our 1:2 risk to reward puts the target at 332 points. So dividing £90 by 166 is 54p. So to fit the rules, you could trade this one at 54p per point, risking £90 to make £180.
Or say the stop loss on a trade was 80 points, going for a 210-point target. So dividing our £90 maximum risk, that means you could trade at £1.12 on this one. That would risk £90 to make a possible £235.
At the end of the day, it’s your call how much you trade with per trade and what you have in your bank.
But I hope these guidelines help you figure out what you need – and how to manage your money so that you can stay in the game.
Just run these checks on each trade you do.
The most important thing remains: don’t risk more than you can afford to risk. If you have a small bank, trade accordingly. You can build up your stake as your bank grows – just stick to the 3% rule as it grows.
Trading the Trump effect
OK, now in yesterday’s PW, I mentioned one of my colleagues reckons the last few weeks’ run-up to the election could provide one of the biggest trading opportunities of 2016.
If Trump wins the White House (or it looks that way), we could see 1,000-pip forex moves. Even if he doesn’t, there’s still a way to play it – if you know what you’re doing, as my colleague, Tom does.
And a little while ago this afternoon I passed on an invitation from him to you to see first-hand what he’s thinking in an online event we’re streaming a week on Wednesday, 19th October.
Did you see that?
If so, I hope you’ve put your name down – this could be a massive opportunity for you, a chance to trade alongside one of the best in the business, on what he’s predicting could be a huge move in the forex market.
If you missed Tom’s email earlier, click here for automatic registration.
Download your FREE 'Three Essential
Forex Indicators' report today!
Inside your free report, you'll discover an easy-to-use guide to three technical indicators with the power to seriously improve your trading and change the way you make money from forex.
And, you'll also receive a free subscription to Profit Watch - the hugely informative forex newsletter that's an essential read for ANY trader, new or old.
I respect your privacy and will never pass on your email address to anyone else.
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