Calculate Forex Trading Capital
“Because forex trading is a ‘new item’ for me, I want to try $ 500 first.Later, if the results are good, I add. “
Sentences like the above are sentences that I hear very often. The majority of beginner traders do think like this.
You need to know that forex trading is not the same as tasting food.Take first a little, if it’s new, add.
No. BIG NO. Forex does n’t work that way.
Forex trading is more similar to planning an exploratory expedition rather than tasting food. I still remember when I first came to know the world of forex trading in 2005, we slipped the word “forex” into “forest” because we considered the same as “wild life in a jungle full of distress”.
The failure is not entirely wrong, considering forex is a high-risk business where you can lose a number, in part, or maybe even 80% of your capital in a short time. In fact, novice traders are lying here and there.
Most beginners finally give up because their capital is not strong enough to withstand market volatility, plus their ignorance (and I was one of them “) the right trading techniques that must integrate analysis techniques, decision making, risk management, capital management plus emotional mastery. Without all that, it’s almost impossible for you to succeed in forex.
Now, talking about “supplies” means we talk about things that are very important in business, namely CAPITAL. An expedition will almost certainly fail if the supplies carried are inadequate. A business will almost certainly fail if its capital is not strong enough. Logical, isn’t it?
Then actually how much capital should be owned before starting trading?
What is clear must be strong.
OK, then how strong?
Yes, Bro, if everyone knows .
Don’t sulk first. I explained yes.
“Strong” is not always synonymous with “lots”. Traders who have capital (for example) only $ 1,000 cannot be said to be “weak”. Conversely, even those with a capital of $ 10,000 cannot necessarily be categorized as “strong”. It will all depend on how he runs the strategy and manages its capital.
The “1000 Trader” may be able to defeat the achievement of the “10000 Trader” provided that he has a trading plan that is truly right. That’s the key.
But try to develop a little more your imagination. If only a “1000 Trader” can have a good achievement with the trading plan key that is really right, let alone the “10000 Trader”?
This article is not trying to underestimate let alone diminish the spirit of the trader with capital tight. Not at all. What I want to convey here is the idea that the stronger the capital of a trader, the better, as long as he holds the “key” mentioned earlier: the trading plan is really right.
Now let’s look at the reality.
It’s true that traders with minimal capital ($ 500 for example) also have the opportunity to succeed. I will not cover up that fact. I even agreed with the statement. But in fact the population of traders like that is also small and is only filled by traders with “super” quality. If you are a super quality trader, just enter the population.
But clearly the flexibility of strategy with minimal capital will be far below the larger capital. Let’s take an example.
Suppose there are opportunities that are as good as in several currency pairs at the same time. When the capital is very small, it is not enough to open a position on all of these pairs at once because the trading plan that was made before prevents you. Because the capital is “tight”, finally you are forced to choose one pair that you think has the greatest potential to make profit.
But if you turn out to be “wrong”, because you actually experience loss.While if you open a position on another currency pair , you should get a profit. In fact, often the benefits can cover loss of position in other pairs .
At that time you will realize that if the capital owned is at least double that, then at least you can open two positions on two different pairs without worrying about overtrade because everything has been calculated in the trading plan.
Another case, it will often be enough (if you are disciplined in the trading plan) to meet conditions where you cannot trade even though the signal or opportunity is good because the stop loss exceeds your risk tolerance. The illustration below may be a reference.
* The illustration above uses an example if you make transactions at an official broker (LEGAL) in Indonesia, where the minimum lot allowed is 0.1 lot.
So, still want to trade forex with capital tight? Think again .