I saw your article about capitalization and I want to ask you, for a beginner how much initial capital is needed to invest in trading a market like Forex?
No more than you can afford to lose and no less than need to reach your strategic goals.
The main point here is that I cannot answer this question with specificity for you. Another point is that if you are asking this question, you are not ready to trade any market, much less forex.
Both points above relate to one of the fundamentals of trading – develop and follow a strategic plan. The initial phase of any trading strategy is to define your capital position for trading, which means asking, “How much can I afford to lose?” The second part of this is to look at the market you are trading and define how much money it will take to reach your strategic goals. Is your goal to make a living while supporting a family of five, or do you simply want to learn how to trade forex with real money? Your answers to these questions define the capitalization you need to begin trading forex, or any other market for that matter.
Listen up folks. Trading is only a game if you are wealthy enough to treat it as such. Otherwise, trading is serious business, and just as it is in any business, before you start putting money in, you develop a business plan, and then that money is allocated according to the plan. The capital necessary to make money and how much you can afford to lose define the capitalization amount.
Maybe it is just me because beginners write to me, but I am getting the distinct impression that a lot of folks out there see trading as some kind of easy money train. It reminds me of the pyramid schemes that were popular back in the 1980s. Without understanding the concept, people were simply throwing their money into these scams. Why? Pyramids were marketed as an easy way to make money. Lazy people who do not understand the value of work, and the role it plays in getting you what you want, were the primary targets then. Today, it appears, trading has the same allure to the same type of people.
If you doubt what I am saying, go back to yesterday’s article and look at the headline that promises extraordinary returns. This popular bull crap sends the message that easy money is just waiting for you. Don’t be fooled. If you want to trade forex, equities, commodities, futures, or options, get ready to struggle, work, and in time maybe make a go of it. Hell, don’t believe me. Write to anyone of the seasoned traders writing commentary on this site and ask that person the following question – how many “traders” did you see lying on the side of the road as you traveled your long, difficult journey to get where you are today?
True, the question I addressed today does not necessarily indicate the writer is gullible and looking for easy money (just naïve about trading), but it does imply that gullibility in the trading world exists. Think about this – if you had $100,000 “extra” dollars, would you open a restaurant if you knew nothing about how the restaurant industry works?
Trade in the day; invest in your life …
