By Your Trading Mentor
MY ANSWER MIGHT SURPRISE YOU
One of the questions which I get asked the most as a trading mentor is ‘How much money do I need to start trading forex?’ Sensible question. If you don’t have enough to start trading properly then you shouldn’t bother at all right? Not necessarily! I started trading forex on a £200 account. Did I turn that into a million pounds? No, obviously I didn’t. Did I turn that into any substantial profit? Again, no. But I did learn how to trade without losing a load of money in the process which was pretty valuable. And you can use those skills to later apply for funding which I’ll go on to explain later.
TRADING FOREX IS LIKE DRIVING A CAR
I have several analogies where I compare learning to trade the financial markets to learning to drive a car. Let me share one of them with you. Would you suggest a brand new driver in their first year of passing their test drive a Lamborghini? Probably not. No matter how good a driver you are in your first year, there will undoubtably be a few unexpected bumps and bruises along the way, and anyone who’s been driving for long enough knows that. Your first car usually ends up with a few scratches and dents, no mater how careful you were or how you passed your test on your first go. Think of your first car as your first trading account, don’t spend too much on it because it’s probably not going to last too long anyway! Obviously most people go on to drive more or less ok without causing too much daily damage after a few years, this is why your insurance tends to go down. Most traders give up before they get to this point as they don’t need to run a trading account every day to get to work so they don’t get forced to get better through daily practice. I can do a whole other blog post on how the key to success is consistent practice but that’s for another day when I’ll compare learning to trade to training as an athlete.
Most traders don’t make millions in their first year trading. Most don’t even break even. The first year should be seen as a year when you are learning. Like with any job, you have to learn what you are doing first before you can expect to be good or to make money from it. There’s an unrealistic expectation (which I partly blame fake gurus on Instagram for) that everyone who learns how to trade should be making silly money straight away.
LETS TALK NUMBERS
How much can you reasonably expect to make as a forex trader once you are good at it? Let’s assume you’ve put in at least a year of practice and you are a wizard at both technical and fundamental analysis, maybe you could make around 1-10% a month in profit of your total capital if you are very good BUT don’t expect that it’s going to be 10% every month. Not all months present good opportunities and you might not be at your best every month. Let’s stay humble and keep to the bottom end of that and say you make 1% profit a month (that’s 12% a year which is better then most savings accounts but not as good as Warren Buffett who reportedly makes around 20% a year trading) If you are trading a £200 account, like I was, that’s about £2 in profit at the end of a month of work. So let’s go to the other end and say you have a £100,000 trading account, that 1% then becomes £1,000 a month. A little disappointing right? Obviously 10% is £10,000 a month which is more exciting but we’ve already established we can’t bank on that happening every month plus we also need a spare £100,000 sitting around doing nothing. The solution? Well there are these wonderful things called prop firms.
FLIP A SMALL FOREX ACCOUNT
So if you’re not familiar with the concept of a prop firm its a company which will allow you to trade their money for them in exchange for a percentage of the profits. There is usually a fee to sign up and a test which needs to be passed to prove that you are a responsible trader. But to me, this is very clearly the solution for those who can trade but who don’t have the capital to make their trading profits actually mean anything significant.
Trading Angel recommends the prop firm FTUK for forex traders in the UK. What I like about about them is that you can actually go straight to being funded without having to go through the challenge part. There is a small fee for this so you will need to pay £150 as your sign up fee rather than £119. Profit splits to begin are 50/50 however as you scale up you can actually progress to an 80/2- split in your favour.
If you’d like to sign up to FTUK you can use this link
So to conclude, How much money do you need to start trading forex? None at all, technically. You can self teach and learn on a demo account and when you’re good enough, then apply to a prop firm. Do I think this is realistic? Not really. I think that live trading with real money is definitely helpful to practicing your strategy first before applying to a prop firm. And you will defiantly need a clear strategy or set of rules in place to practice with. So either you can compile this yourself or you can pay a trading mentor or sign up to a trading course. Trading Angel teaches four strategies as part of the basic package so this includes a trend trading strategy, a reversal strategy, a momentum strategy and a breakout strategy. For details of how to be added to the waitlist for mentorship by Trading Angel you can visit the website here:
Love from your Trading Mentor x