Many beginning traders have a difficult time figuring out how much money to put towards trading. Because different markets require a trader to invest different amounts, some markets can be cost prohibitive to beginning traders. Rockwell Trading feels the amount of money you are willing to risk as a trader is something you should consider carefully before you begin.
Start by looking at your savings and then determine how much money you can comfortably set aside for trading. This amount should be considered “risk capital” and must not impact your lifestyle should you lose all or part of it.
Now determine what your trading goals are and what markets you may want to trade. Here are Rockwell Trading recommendations on what account sizes are needed to trade various markets:
Forex market will require $500 in your initial trading account.
You should have anywhere from $1,000 to $5,000 in your trading account if you would like to trade Options.
To day trade Futures you will need between $5,000 and $10,000 in your trading account.
Stocks are the most cost prohibitive, requiring at least $25,000 in your account.
If you know how much money you have, the market you would like to trade, and have your financial goals in mind, the next step is determining your risk tolerance.
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Rockwell Trading Recommendations - Proper Account Sizing