How Much Money Do You Need To Start Forex Trading In 2023?
Forex trading has always been known as an industry you can start with very little capital up front. The lower barriers of entry make it a very attractive prospect for retail traders looking to get into such a liquid market. But is this true?
You need at least £1000 to start forex trading in 2023, if you’re being conservative. In an ideal world, you’d have £2000 – £3000 saved and ready to use within the markets if required.
In this article, we will look at all the different factors and costs you need to consider when starting your journey in the forex markets. So, let’s get into it!
How Much Money Do You Need To Start Forex Trading In 2023?
Forex trading is not as cheap to start as people may think. Due to rampant social media marketing from gurus and influencers, it’s in the back of everyone’s heads that you can start forex trading with £10 and an iPhone. Although this statement is technically not completely untrue, you will not be making any kinds of profits and certainly not living the ‘forex lifestyle’ as marketed. In fact, you’re likely to blow through your £10 in one trade, and then you’ll be back to square one. Forex trading, like any other method of generating income or returns, is a business. Your admittance into the forex arena should be planned, methodical and calculated. This includes understanding how much money you’ll need to get your seat at the table. Below, we are going to break down all of your potential costs, so you can clearly understand how much money you need to start forex trading. It’s worth bearing in mind that we are looking to do this with the least money needed as possible.
Factors To Consider When Budgeting To Start Trading Forex
These are the main costs or factors you have to consider when starting your forex trading journey…
Brokers Minimum Deposits
Whilst looking at how much money you require to start forex trading, it’s important to consider the minimum deposit brokers will accept. This is going to range from broker to broker, depending on where they’re based, their regulations and leverage requirements. As a general rule, you aren’t going to find a regulated broker willing to offer you a live trading account without a minimum deposit size of £200. You’ll be able to find many offshore/unregulated brokers offering £10 deposits with gigantic levels of leverage, but these brokers will just be taking your money, frankly.
It’s also worth remembering that you should be trading on demo account funds, way before you even think about opening a real-money funded account. Demo accounts are typically free to open and allow you to simulate real market conditions, with fake money. The reason for the demo account first is simple. Without a solid understanding of lot sizes and risk management, you’re going to lose whatever you deposit into your trading account. If that’s £100 first, you’ll likely lose that £100. However, once you have furthered your learning, we can hope that you’ll apply strict risk management and not lose your trading funds so quickly. To that end, allow a minimum of £200 – £500 for minimum broker deposits.
Some traders like to learn from the markets and some like to learn from courses. Of course, unless you’re looking to seek knowledge from free online channels, you’ll most likely need to pay for trading education. As a general port of call, I’d recommend making use of all the free online resources that you can get your hands on first. These are going to teach you the basics of trading and give you an excellent idea of what you’re getting yourself into. You may even realize that trading isn’t for you, and you could have wasted your investment if you’d purchased a course.
Once you’re through all the basics, and you’re starting to get really invested in the idea of trading, it might be the right time to buy a course. There are plenty of courses and education resources out there, covering all kinds of different trading topics. It’s worth being very cautious, however, as many of the courses you see are just rehashed versions of free online content. In fact, most ‘mentors’ are just unprofitable traders, looking to make some money from their failed venture. Obviously, it’s not going to be worth learning from them. So, how do you know whom to learn from? You need to see a verified track record from MyFxBook or a similar third-party website. If you have this, it may be worth looking into. In terms of price point for trading education, it can vary greatly. I’d recommend that it’s not worth ever spending more than £500 on a trading course. In fact, even that is a bit steep. I would want to make it perfectly clear, though, that there is no secret strategy within the markets, no one has something to sell that you couldn’t find online, for free. Certainly, do not dedicate a large budget to paying for trading education.
Trading Platform Costs
Typically, you’ll be able to get a trading platform for free through a brokerage account. For example, the majority of the largest brokers are providing traders with MetaTrader 5 and MetaTrader 4 to use as their trading platforms. Some brokers are even offering in-house designed platforms, but these vary significantly in quality. Many retail traders like to use TradingView as their charting software of choice, then use MetaTrader to execute the positions. The reason for this is simply MetaTrader was not designed with all the user experience perks that TradingView was. Therefore, if you’re going to be back testing and staring at charts for hours each day, you may as well invest in the highest functionality.
To that end, I’d allow £20 per month in costs associated with trading platforms.
The Cost Of Obtaining Funded Trading Accounts
The next cost you need to consider is the cost of obtaining trading capital. Although £1000 is enough to get you started in this industry, it’s not going to be even close to enough money to earn any kind of decent profits. Let’s break down the numbers… A very profitable and consistent trader may net an average return of 4% per month. This is an excellent figure. On an account size of £1000, this will be £40 profit per month, pre-tax. On a £10,000 balance it’ll be £400 per month. You can clearly see that if you’re going to trade for the long term, you need to have at least £100,000 in trading capital behind you. Most people don’t have this level of capital to invest, of course, which is where prop firm funding comes in.
Lux Trading Firm funds our traders with up to £10,000,000 in real funds, in exchange for a profit split. When our traders profit, we profit. If you want additional information around our funded accounts, have a read!
In short, to take an evaluation (when successful, you’ll be funded £100,000), you will be paying £449. This will be refunded to you, upon being successful and receiving your funding.
You should not seek to obtain a funded account until you’re already a profitable forex trader, but once you are, this is a necessary cost that you need to consider. A lack of trading capital and profits is one of the main reasons why traders ‘hang up their tools’ in the industry, when they just needed to continue executing their system on a larger amount of trading capital.
If you’ve ever seen a movie that has trading in, you’ll have it in your head that traders all need 4 monitors and a top of the range computer. Frankly, this isn’t true and is overkill, especially for retail forex traders. I’d highly recommend avoiding purchasing any additional computers, screens, or hardware at all, unless you simply cannot access the markets with your current setup. If you are struggling to download trading software or have latency issues, you could experiment with logging into a VPN before you look at buying a whole new setup. VPN’s, specific for trading, will set you back maybe £20 per month, whereas a new trading setup will cost thousands, if you’re looking for the top of the range.
In Summary – How Much Money Do You Need To Start Trading Forex?
In conclusion, you’ll need at least £1.000 to start forex trading in 2023. If you’re looking to have a bit of a cushion behind you, I’d recommend at least £2.000 – £3.000 in capital to be spent on trading platform costs, education, broker minimum deposits and prop firm funding.
Are you looking to obtain a large funded trading account? Work with Lux Trading Firm now!
Once again, Lux Trading Firm got a rave Prop Trading Firm Review, this time from Proprietary Firms.