How Much Initial Deposit Should I Invest In Forex?

Forex is a speculative form of investment. Add to that, leverage is allowed with forex investment. And this combination makes investing in forex trading a risky type of investment alternative.

But with the high risk characteristic of forex investments come the lucrative profit potentials that can be achieved when done correctly and wisely. Maybe you have heard of the scary statistic that 9 out of 10 forex investors lose their money on forex trading within the first few weeks of trading. And similarly, you may have also heard of the success stories of forex millionaires who trade for a living using forex investments.

So maybe you want to try your luck with forex trading. Of course, you would not be going into forex investments with just luck as your weapon. Maybe you have already done your research and your training. You may have already developed a profitable trading strategy using a demo account. And now, you want to test it on a real, live account.

But you are not sure as to how much would be the initial deposit that you should invest when you open your real, live forex account.

In order to come up with a figure, you should first ask yourself a few questions.

1.) How much investment can I afford to lose?

Let’s face it. Forex is very risky. And if 9 out of 10 investors lose their money in forex, better be prepared to be one of those nine unlucky investors. But of course, you would not be investing with a losing mindset. This is just to determine an amount which you would not lose sleep over should you lose entirely. Think of it as money that you would not be needing for the college education of your children. Or money that you can afford to splurge for in a vacation. This should be money that, once you lose, you can always get back without much heartache and hardships.

2.) How much is the minimum investment with the forex broker that you chose?

Whether you are targeting to open a standard account, or a mini account, or even a micro account, you should know the minimum investment that you forex broker allows. Then compare it with your answer to the first question of how much you can afford to lose. See where your amount can be accepted. It is usually advisable that you do not invest the floor minimum amount required by the forex brokers. For example, if the minimum for a mini account is USD 300, and USD 1,000 for a standard account, and you have exactly USD 1,000 in funds that you can invest, it is advisable that you choose a mini over a standard account even if your funds are sufficient to open a standard account. The reason for this is that you can have more margin to maneuver from with a mini account than with a standard account with the amount that you have. Surely, you know about margin requirements and proper capital management if you have already done your homework in these areas.

3.) Would the amount that you can invest be enough with the number of trades you would be making in any particular time be enough considering the type of trading strategy that you would use?

Different trading strategies require different types of margin. If your strategy requires that you open several lots at the same time, or that you strategy includes adding up trades at certain levels, you should compute if the money that you can invest is enough to cover the margin required for this type of trading. And not only should it be enough to cover the margin, but it should leave your account an acceptable room to breathe and maneuver should the market move against your position. Again, the reason for this should already be clear to you if you fully understand the value of risk management for your capital.

With those three questions, you should be able to arrive at the figure for your initial deposit for your live forex account. Remember that these guidelines are aimed to ensure that you have room for proper capital management while making sure that you minimize the risks associated with forex trading.