Insufficient Trading Capital

 

Today I just wanted to touch on yet another newbie mistake which is opening and funding a live account with insufficient funds in order to be able to manage it properly which will eventually lead to your portfolio showing a big round 0. You will read in plenty of outlets that you can make x-amount of money with a single trade and high leverage.

In theory that is true and you can fund your account with $100 and place that one big trade with high leverage.

In reality it does not work like that and you need to implement a risk management policy which suits your trading style and on top of that you also need to execute it. Let’s say you open your account with only $100 and you implement a conservative 2% risk management rule which means you can lose $2 per trade. In case you opened a standard account this means that you need to attempt to time each trade more carefully as $2 in floating trading losses is quickly achieved.

You can’t trade less than 0.01 lots and while that may seem like nothing it is enough to blow your account. In order to remain within your risk management you need to close each position after you lose $2 and that number will start to decrease as your account shrinks. In order to properly manage your account with a 2% risk management and only trading lot sizes of 0.01 you should have at least $1,000 (amounts vary with each trader and I picked a very general number) in your account so you can even begin to manage a portfolio.

With $100 you should stick to a micro-account where you need to be realistic about your earnings expectations and grow your capital over time until you can move to a standard account. In the end it comes down to how much you can keep and not how much you earn and without proper risk management your portfolio is exposed to plenty of risk. Leverage does not matter here as you are not adjusting how much you are risking.

 

I don't even like the idea of starting with 100$. As a fun, to spend some time - yes, but to trade seriously, one should start with 1000$ minimum and some demo account experience..

 

You can not trade with 100$. There is a lowest limit of capital that makes sense to start trading. Bellow that it is like pushing car up the hill instead of driving it

 

Insufficient Trading Capital = Main Cause of Failure

If you are trading to small lots, the stress is not worth your time. Might be better to get a job rather than waste all your hours for .01 lots.

 

Insufficient capital is the main cu=asue of loss for new traders .. People are attracted by this business and invest a little amount in it . They had no margin to move in market so they are fail in risky trades when they loose all of their amount.

 

On most of the brokers you can not "place that one big trade with high leverage" on a $100 account simply because the margin will not allow it to you. And with high leverage you will loose that $100 in a matter of few pips

 

But it is always good to start with a minimal capital during the initial trading days. This will reduce risk and traders can get a better idea about the markets.

 

Ability to deposit as small as 100$ is just for attracting people. You must realize that you won't get far with such deposits. There is a saying "give and you'll receive" - don't be greedy and don't tremble over every pip going down and maybe then you will have a character and strength to withstand emotional and market down and upswings.

 

There is just no way to manage an account with $100. It is good for training purposes for a few weeks, but if you are serious about trading you should have a few thousand dollars to start with.

 
TheLastBear:
There is just no way to manage an account with $100. It is good for training purposes for a few weeks, but if you are serious about trading you should have a few thousand dollars to start with.

Yes, That's what I am saying. You cannot make thousands using that $100 but you can gain very good experience without risking more.

 

I agree with the others, trading seriously with $100 will get you nowhere. That said, it's great practice. You could go from demo trading to $100 account to have a feel of trading real money without actually risking too much. It's good practice and you could become a better trader for it.

Then once you're ready, go for the more obvious account size of at least 1k.

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