I am frequently asked how much money is required to trade futures and/or FOREX. It is not a simple answer for several reasons – such as the fact that at most brokers you have to have a separate account for futures and FOREX. And many brokers have a minimum for setting up an account.

However, I do have an idea about account size that may be a bit different from that of many other traders. First let’s talk about the fact that a trade in futures or FOREX requires a “margin”. Margin is the amount that you must put up to enter the trade – and the amount that you must maintain in order to stay in the trade (often the two are not exactly the same – especially for day traders). So you must have sufficient money in your account to cover that applicable margin. However, it is a good idea to have more than that minimum. How much more? That is an interesting question and you will get a variety of answers from traders and pundits.

The question I like to ask in return is, “does a large account make you a better trader”? The quick answer, in my opinion, is “not likely”. In fact, having a large account can – if you are not careful – result in making a trade that you would not make if you were in a tight money situation.

Personally, I prefer to trade an account with a small only a small amount of money. That way I am constantly reminded that I cannot make foolish mistakes – lest I have to add money to my account in order to keep trading (yes, I have had to do this in the past) – and that is a bit humiliating for an experienced trader.

Bottom line – if you have a large account, trade it as though it was minimal. A good trade will add to a large account – and a minimal account as well. A short term trader should have the patience to wait for a good trade to develop – and the size of your account should never be a factor in selecting a trade.

 

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