The following is a guest blog post:
To venture into the forex trading market in Singapore, you’ll need capital. This capital is the total sum of money you deposit with your broker. Eventually, you use this money to buy and sell currencies. Your capital is also your investment and it determines the amount of profits you can make. It’s worth mentioning that bigger trading accounts can launch bigger position sizes compared to smaller trading accounts. How much money do you need to venture into the forex trading industry?
How much should you Invest in Forex?
Various factors determine the minimum amount of money you need to trade in Singapore. These include the available funds, your trading style, the minimum amount your broker needs, the average stop loss level, and your experience level. Remember, you shouldn’t invest more than you can be comfortable losing. As a trader in Singapore, you need to know that losing in forex trading is inevitable. However, you can control the amount of money you lose by limiting the amount of money you invest.
What’s Your Trading Style?
Your trading style plays a huge role in determining your forex trading capital. For instance, you will need less starting capital for scalping strategy compared to position or swing trading. This is because scalping requires minimal stop-loss levels. Combining leverage with the stop loss levels helps sustain sufficient free margin regardless of the direction the trade takes.
Other trading strategies such as position, swing, and day trading require bigger stop-loss levels. Maintaining these especially when you have a smaller trading account can be a difficult task. The larger the trading account you have in Singapore, the better you’ll be able to maintain sufficient free margin and avert a margin call. Your preferred broker may need you to have a forex trading minimum account size if you’re to open an account.
Many times, your broker will determine your minimum deposit. Remember, a big percentage of brokers in Singapore may be comfortable with deposits as low as $10. Other brokers could ask for as much as $1,000. If you’re trading on a budget, you need to be sure that your broker will allow your starting capital.
How experienced are you? Experience plays a major role when it comes to determining the amount of Singaporean dollars you need to trade. Beginners can start with as low as $100 just to experience how trading with real money feels. If you’re an experienced trader, you can invest as much capital as you can afford.
Understanding the Demo Account
Demo accounts are a risk-free method which doesn’t require you to deposit real money. Demo trading allows you to practice and gain experience in the forex market. Demo accounts allow you to familiarize yourself with the fundamental tools in your trading platform. They also help you place some trades and understand how to calculate position sizes. Once you have mastered the art of trading, it’s advisable to open a small actual account to understand what it takes to trade using real money.
Trading Forex with Minimal Capital
Are there any pros and cons of trading using a minimal trading account balance? Not all forex traders can afford a large trading account. This can be due to lack of enough trading experience or sufficient funds.
Assuming you’re trading on high leverage, chances are high that you’ll deplete your free margin fast. If this happens, your broker will give you a margin call and your open positions will automatically be closed at the existing market prices. Ensure that you have sufficient free margin to sustain adverse price fluctuations.
There may not be a definitive answer to show the amount of capital you need to venture in forex trading. Various factors determine the minimum amount of capital you need to start trading as we’ve seen above which include, your experience, the average stop-loss levels, and the available funds. Remember, short term trading strategies need smaller stop-loss levels while long term trading styles need bigger stop-loss levels.