This is THE question everyone is asking or has asked themselves, what capital is needed to start trading? Small variant: what capital to make a living from forex trading? Of course, it will depend on everyone’s performance, their risk taking, the currencies traded. But since this is certainly the question we have been asked the most since we started trading, we will try to give you some answers.
Can we live on forex trading?
This is already a question that deserves to be asked! Many will try to discourage you and some will assure you that it is simple. That you just have to buy their training at X € to have the recipe for success. we believe that it is possible to make a living from trading, even if it is not my case. What you have to keep in mind is that possible does not mean easy and as with any profession there are advantages and disadvantages. If you cannot bear the uncertainty, difficult to become an independent trader, you will agree. If you think that this way of life, because beyond a simple job it is indeed a way of life, is made for you, here are some tips.
Calculate your starting capital
Calculation methods abound, all more fanciful than each other. Be aware that it is impossible to calculate how much you will earn, we can only estimate your future gains using statistics from past trades. Nothing precise, therefore, but a very useful order of ideas. Even if past performance is no guarantee of future performance, but you know that. From the Primeholders you can find the best solutions now.
One parameter is certain: the amount you need to live each month. So let’s go from there. Let’s say, € 2,000.
Or annual, or quarterly, as you wish. For the example, we will take a monthly return of 5%.
The tax rate: if you live in France, you start badly. We will have to divide the profits by 2 (we consider that trading is your MAIN source of income). It will therefore be necessary to release € 4,000 / month.
The main disadvantage of this method is that it does not account for losses. Some months, you will make more than 5% and others much less, it is an average. The drawdown parameter (maximum recorded loss) is overlooked by many traders, and yet it challenges a whole system! To remedy this, there is only one solution: set up a back-up fund which will be used to pay the bills but in no case to trade.
Following this example, 4000 / 0.05 = 80,000
This would be the amount of your starting capital. To which we should add the amount of the emergency fund. Discouraging? Yes! But this result should be put into perspective. Many traders make well over 5% profit per month! This monthly return is what will determine whether you can make a living from trading, much more than your starting capital.
Now take action!
But all these assumptions do not advance much, the best is still to try. we am not telling you to lay off your job overnight, but rather to try your hand at trading in real mode if it is not already done (provided you have gone through a demo account of course) and above all to track down your statistics to see what your average monthly return is. we think that for these figures to be reliable, they must be considered over a period of at least one year. Already, one year of daily trading, it allows you to test your motivation! And above all to erase any errors or luck.