How Much Do You Need to Buy Forex

When you decide to buy forex and profit from the thriving market, you may be wondering how much you should invest. Well, the answer is simpler than you thought.

The forex market is a growing industry with a huge potential for returns as well as losses. Due to the high liquidity, a lot of people are attracted to this investment potential but it tends to be tricky for new entrants. In addition, few novice traders have all the answers to the numerous questions on their minds. The most common query revolves around the amount necessary to make the investment and this article seeks to address the issue.

The starting point when you want to buy forex

Before you start your trading career, there are tons of questions you need to address. While these questions can be overwhelming, it is the answer that will determine your achievements in the long run. When you consider the amount you need to buy forex as well as the various positions you should take, the answer ranges from zero to infinity. Basically, a demo account gives you access to a live market without putting your hard earned cash on the line since you will be using virtual currency.

If you are using a reputable platform, you can combine a demo account with a live account before trading real currencies. When you don’t have any previous experience in the forex market, using virtual accounts is a great way of learning the ropes. Basically, this means that you will be making plenty of mistakes as this is part of the learning process but you don’t have to suffer losses to acquire this knowledge.

The exact amount that you need to buy forex will depend on the account you open. This is because there are different services that offer varied functionalities priced at different levels. Basically, it is possible to start trading with small amounts ranging from $200. Since these accounts come with high leverage and low spreads, it is great for helping you improve your confidence. After using it for a while, you can switch to a higher option which provides better specs like fast execution and ultra-low spreads which are ideal for seasoned traders.

Be aware of the risks involved

Generally, you must never trade an amount that you can’t afford to live without. When deciding the initial investment, take a look at your personal finances and figure out what fits in your budget as well as your current attitude regarding risks involved when you buy forex. Since trading can introduce pressure in your life, try to stick to conservative trades to make the going easier. By doing this, you will have an easier time dealing with adverse outcomes. As a rule of thumb, limit your trades to 1% of your entire capital.

Since it can be difficult to point out the exact loss related to a single trade, it is safe to conclude that the associated risk should be equal to the amount you are comfortable of losing before exiting a trade. Nevertheless, this approach tends to underestimate the actual loss because if you change your mind, the loss may be more. By using a stop loss, you are drawing a line under a certain position. However, this is not a guaranteed order since some markets can exhibit spillage characteristics.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes