At the last Traders Forum in October, the size of peoples’ Trading Account Capital was raised and I was a little shocked and surprised to learn that the average Spread Betting Account Capital was between £200 to £500. Why was I a little shocked and surprised?
Well if your trading capital is only a few hundred pounds, then you can’t possibly manage your risk sufficiently to ensure you can survive a few bad trades and have sufficient capital to trade another day without reseeding your account.
If you haven’t yet read a previous Blog article of mine, entitled: ‘How Much Money Do I Need To Trade Forex’, then I highly recommend you do so.
My former Forex Trading Mentor would and still does say that ‘Under Capitalisation is a Crime’. So try and work out how much you need in your trading account to be able to manage your risk correctly if you are going to risk 1%, 2% or even 3% on any one trade. You may decide to risk more, that is your choice, but the more you risk on any one trade the quicker your account will disappear if you have a run of losing trades.
If your calculations show that you have insufficient trading capital in your account, then maybe it might be an idea to add some more if you have it, or start to put some aside whilst you trade in a Demo account.
Top Trading Tip: Make sure you are not a trading ‘criminal’ by ensuring you have sufficient capital in your trading account in order to manage your chosen level of risk correctly and so that you can survive to trade another day, should you have a string of losing trades.