Why do you need $25,000 plus starting capital.

Hey


Im just slightly puzzeled why loads of books and websites say that you need at least like $25,000 dollars to start trading. And you can't start with a couple of thousand. There must be something i don't get as when your beginning can't you just use 1:1 leverage and trade so 1 pip =1 cent (forex) then you would still get the education but much cheaper and wouldn't need so much capital.

This logic must be floored somewhere.

Thank You
Best Regards

You do not need $25000 or anything like it to get started. Start small, and concentrate on making pips rather than money. Once you learn the skills and discipline needed to be successful you can start planning a strategy to make money.

Too many people start by not knowing what they are getting into, and losing too much. If you lose half of your capital in a short time, you need to make 100% return on your remaining capital just to get back to where you started.

Do not make that mistake

tomhunter said:

when your beginning can't you just use 1:1 leverage and trade so 1 pip =1 cent (forex) then you would still get the education...

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You've answered your own question. You might get an education but you aren't going to make enough money to buy more than a bag of sweets. You can start trading with whatever amount you like of course, but you also have to be realistic about the returns you're going to generate. In my view a lot of newbies come unstuck by thinking they can be use a couple of thousand in capitalisation to make life-changing amounts of money. What these books are effectively saying is to be realistic about the percentage returns you're going to generate from a given starting point.

As Pipppin says, it pays to start small and concentrate on method, but eventually you'll have to step up with some proper capital if you're going to make enough money for the investment in time to be worthwhile.

tomhunter said:

Hey


Im just slightly puzzeled why loads of books and websites say that you need at least like $25,000 dollars to start trading. And you can't start with a couple of thousand. There must be something i don't get as when your beginning can't you just use 1:1 leverage and trade so 1 pip =1 cent (forex) then you would still get the education but much cheaper and wouldn't need so much capital.

This logic must be floored somewhere.

Thank You
Best Regards

Click to expand...

$25000 refers to day traders of shares. Look on Search for full explanation. (Try "daytrading")

tomhunter said:

Hey


Im just slightly puzzeled why loads of books and websites say that you need at least like $25,000 dollars to start trading. And you can't start with a couple of thousand. There must be something i don't get as when your beginning can't you just use 1:1 leverage and trade so 1 pip =1 cent (forex) then you would still get the education but much cheaper and wouldn't need so much capital.

This logic must be floored somewhere.

Thank You
Best Regards

Click to expand...

OK, you are starting the very long road in trading and you are making it very long by reading books. When I first started trading, I read so many books that I didn't know WTF was happenning. Here is a guarantee: you will have so much wrong information from reading books that, you will then need a lot of time to unlearn that stuff before you can trade with profits consistently. When you get there, it will be lonely, boring and very very easy you will not believe how much rubbish is written in trading books, and how much rubbisis spoken about trading everywhere.

Of course you don't need 25k to start trading. That is such an ignorant thing to say. However, expect advice like that everywhere, even from some 'highly respected' gurus like Van Tharp. Here is another rubbish I gauantee you will hear ad nauseaum: you would be a trading God if you made X% per year (usually anything above 20%). And there are many more. Actually, I may even give you a list of the c'rap these people talk.

neil said:

$25000 refers to day traders of shares. Look on Search for full explanation. (Try "daytrading")

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Good point Neil - the man's right of course (I'd forgotten this), but to day trade stocks in the US the SEC requires a $25k minimum account size. If you're reading books by US authors they may well be referring to this - see here for an eg: http://www.interactivebrokers.com/en/trading/marginRequirements/patternDayTraders.php?ib_entity=uk


Mind you, I stick by my earlier comment about over/under capitalisation. Say you can generate a 100% return on capital a year (a round number plucked from the air, but which would be pretty good going) - what level of capital do you need invested before it's really worth the effort? Even if I was fully confident that I could make 100% I'd have problems giving up a day job just to make £13k a year. Otherwise you'd be better rewarded flipping burgers for the minimum wage...

Jack o'Clubs said:

Good point Neil - the man's right of course (I'd forgotten this), but to day trade stocks in the US the SEC requires a $25k minimum account size. If you're reading books by US authors they may well be referring to this - see here for an eg: http://www.interactivebrokers.com/en/trading/marginRequirements/patternDayTraders.php?ib_entity=uk


Mind you, I stick by my earlier comment about over/under capitalisation. Say you can generate a 100% return on capital a year (a round number plucked from the air, but which would be pretty good going) - what level of capital do you need invested before it's really worth the effort? Even if I was fully confident that I could make 100% I'd have problems giving up a day job just to make £13k a year. Otherwise you'd be better rewarded flipping burgers for the minimum wage...

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Ah yes i was looking at high probability trading, just out of interest i saw this talked about somewhere, if a sucessfull trader had a proven track record but needed capitalisation are there venture capitalists/investors they can go to or banks or anything.


Thanks alot
Best Regards

£25,000 min account size is needed to be a Pattern Day Trader.

Definition

An SEC designation applying to any individual who buys and sells a particular security in the same trading day at least four times in a five-day period, and for whom same-day trades make up at least 6% of the trader's activity during that period. Pattern day traders are subject to special rules.
The NYSE regulations state that if an account with less than 25,000 USD is flagged as a day trading account, the account must be frozen to prevent additional trades for a period of 90 days.

Glenn

$25000 refers to day traders of shares.

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What about swing trading, where you're holding the stock for anything from a few days to a week or more? Would you say it is possible to get anywhere with only a couple of thousand when doing that sort of trading?

Iotrez said:

What about swing trading, where you're holding the stock for anything from a few days to a week or more? Would you say it is possible to get anywhere with only a couple of thousand when doing that sort of trading?

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See GLENNS post above

You need around 10.000 USD or EURO to earn money quickly......trust me.

Iotrez said:

What about swing trading, where you're holding the stock for anything from a few days to a week or more? Would you say it is possible to get anywhere with only a couple of thousand when doing that sort of trading?

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I'm getting somewhere slowly but surely.

I started out with $6K, and I've increased it to $9K since June 1 last summer.

Tom,

You can start trading with a small amount, say £5000, but the greater the amount, the more downside protection you have and the longer the learning period.

However, the main question is whether you will be depending on this to meet your living expenses – mortgage payments, rent, council tax, food, utility bills, drink, drugs and prostitutes, etc. If these amount to, eg £500 per week or 10% of trading capital, is this a realistic expectation?

The greater the amount of capital, the lower the percentage return merely to exist and therefore less pressure and “stress” to perform beyond one’s capacity and ability.

Grant.