[thelastbear]

Today I just wanted to touch on yet another newbie mistake which is opening and funding a live account with insufficient funds in order to be able to manage it properly which will eventually lead to your portfolio showing a big round 0. You will read in plenty of outlets that you can make x-amount of money with a single trade and high leverage. In theory that is true and you can fund your account with $100 and place that one big trade with high leverage.

In reality it does not work like that and you need to implement a risk management policy which suits your trading style and on top of that you also need to execute it. Let’s say you open your account with only $100 and you implement a conservative 2% risk management rule which means you can lose $2 per trade. In case you opened a standard account this means that you need to attempt to time each trade more carefully as $2 in floating trading losses is quickly achieved.

You can’t trade less than 0.01 lots and while that may seem like nothing it is enough to blow your account. In order to remain within your risk management you need to close each position after you lose $2 and that number will start to decrease as your account shrinks. In order to properly manage your account with a 2% risk management and only trading lot sizes of 0.01 you should have at least $1,000 (amounts vary with each trader and I picked a very general number) in your account so you can even begin to manage a portfolio.

With $100 you should stick to a micro-account where you need to be realistic about your earnings expectations and grow your capital over time until you can move to a standard account. In the end it comes down to how much you can keep and not how much you earn and without proper risk management your portfolio is exposed to plenty of risk. Leverage does not matter here as you are not adjusting how much you are risking.

[bret]

Agree with most of your points here.

But for a newbie it is always better to trade with a minimal deposit. So micro account with 0.01 - 0.02 lots make sense.

[Rambo35]

Agree with most of your points here.

But for a newbie it is always better to trade with a minimal deposit. So micro account with 0.01 - 0.02 lots make sense.

Very true, when I started to learn how to trade I used a micro account until I learned how to trade before moving to a standard account.

[mk3fx]

Good points... there's plenty of free trade size calculators out there that will tell you how to size your positions based on your account size, leverage, and pips risked, and figure out how many lots you should risk... or any combination of those..

[wizard77]

This thread is great.. in fact my take on this issue would come up in less than 2 weeks' time. Meanwhile, one of the most neglected problems traders face is that they don't have enough money.

[ACE]

If you position yourself wisely you'll never be in this position... basically anyone with less than $5000 and isn't trading micro account is going to face a margin call.

[bret]

Very true, when I started to learn how to trade I used a micro account until I learned how to trade before moving to a standard account.

This is how we do

[bear]

I've been there twice, had to reinvest the money I make from my real job... this third time is it, if i don't make money no more forex for me...