Today I want to talk about a trader has to face.
Most of the beginning traders save money to make the first deposit and very often this amount is too small to trade, but the broker gives you the opportunity to trade anyway, why?
The fact is that the smaller the deposit, the easier it is to lose them, and the broker knows this.
Therefore, for a smooth trade, you need an amount greater than $100 or $500.
The optimal amount to start trading is $1000
What is the danger of a small deposit?
Beginners can be anyone from a student to a businessman.
And very often the initial funds will be small, because the reason people go to the market is to make money.
A person invests $10, not because he is greedy, but because there are simply no more free funds.
At the same time, the merchant already dreams of millions, and his head begins to spin from such thoughts.
As a result, trades are opened for $1, then for $2, and in the end all the money is lost.
The market does not bring quick profits.
It is also impossible to deposit the last money or borrowed money.
All this will only lead to the drainage of the reservoir.
Why is $1000 considered the best start?
This question can be answered by money management rules.
Everyone remembers the rules of risk, let’s say you decide to risk no more than 5% on each trade.
When trading intraday, the position size is 20-50 pp ., that is, when trading micro lots of 0.01, the risk per trade will be $2-$5. Such a risk is acceptable for a $100 account, since then it will be 5%.
When trading on daily time frames, the average risk is even higher: 50-100 pp . (5-10 pp .). In this case, the account must be at least $200. As you can see, money management clearly indicates the minimum size of the deposit.
This is when trading micro lots.
As a general rule, traders use standard lots because they want to make money fast and it is very risky.
Therefore, you should not start trading with $10 or $200.
It is better to save and collect the required amount, or at least $500, and then it will be easier to trade.
But what if you can’t wait?
How to disperse the deposit?
There are a couple of rules:
A trader must have a trading strategy that works and has proven itself on a demo account and a real account;
Comply with risk management standards;
Please provide a deposit amount of $200-$400.
Subject to these conditions, you can “gently” disperse the deposit.
With a rapid acceleration of the deposit, the risks increase, you need to understand this.
Here are three principles that make it possible:
The risk per trade is set higher than in the classic MM, and can be as high as 10%;
If the trade is not profitable, the risks are not doubled;
When the deposit breaks up to the set limit (for example, from $200 to $500), the trader returns to the previous risk of 5% and trades for several months in accordance with the rules of Money Management. Then you can repeat the “acceleration”.
A popular way to speed up a deposit is Pyramiding, which means adding positions.
Is that how it works:
You determine the main trend on the daily time frame and open a position following the trend.
Then wait for another signal indicating the continuation of the trend.
If there is a signal, open another position along the trend. The protective stop-loss order of the first order is transferred to the opening level of the second order, that is, to the break-even point.
The size of the profit on the second trade should be small, because the trend can change direction at any time.
It is important to remember that this strategy only works if there is a trend, so a flat or a cross should be avoided.
Trading this way is very risky.
The best way is to raise an amount equal to or greater than $1,000.
Then trading will become less dangerous for you as you can use standard money management rules.
Before scattering the deposit, you need to set yourself a target, after reaching it, be ready to use the standard risk rules.
Big risks are rewarded, but even these must be taken with intelligence and control.