„One of the biggest problems we see is trading undercapitalized. Too many traders are in a great hurry to get into the markets and to get rich quick. They have bought the lie that they can make a lot of money starting with a small account.

Although it is possible, it is not realistic. In a hurry to make money trading, most traders begin trading one contract. This is almost a sure way to losing what little capital they have. Everything is riding on a single contract, so the trader is forced to stay in too long or to scalp for only a few pips or ticks.”

Joe Ross in „Conversations with Forex Market Masters”


Most of traders who start their trading adventure hope for high profits, but do not have the equity to stick to a proper money management rules.



SL of 30-40 pips even with an account where 1pip = 1 dollar requires the account to be a few thousand dollars least. Most of the beginners do not have that money so they will not be able to learn anything. Risking even 10% of their deposit is more likely to lead them to heavy losses than heavy profits.

To earn in ‘normal life’ we graduate colleges and universities – the whole process takes at least a dozen years or so. But many people think that Forex is different and they can make huge cash by using a first ‘magic’ system they can get on eBay and with their first account.

Too small equity causes bad risk management. By the way it is worth saying that the best money management plan is one that suits both trader’s personality and his system. Common 1% or 2% of the capital might be too much in one’s early days.

When opening too big positions you are like a driver who drives shiny muscle car over 100mph through crooked streets of a city centre (yeah, that is over 160kmph if you’re using metric system).

Amongst the group of traders who we interviewed only one person ended up their first year in plus. The following story is a great example how proper conclusions drawn from your initial losses lead to … profits.

„My problem was that I opened my first account with $2000 in it and I started to trade standard lots right away…. Boy, what a mistake this was… but nobody cared to tell me that $2000 is not that much if you want to trade standard lots. I had my share of stress because one bad trade that cost me 30 pips wiped out $300 from my account right of the bat. That was scary….

I can not complain about the winning part. Each trade on a plus looked really good too…. But that was not the right way to trade. We can have the best system in the world but we have take into consideration that the market doesn’t care what we have, it does its own thing and we need to be prepared for some surprises. This means, we can not put half of our trading funds on one trade.

As soon as I realized how big of an issue money management is I switched to mini lots right away. That took away a lot of my fear from trading. After I “calmed down” and started to get the pips that I wanted I slowly increased my funds and my position size.”

Monika Korzec in „Conversations with Forex Market Masters”


Recommendations: 


If you think seriously about trading, follow a ‘normal path’:

1. Gather your capital so that you can start serious trading. Think that you would have to earn 10% a month, so save one thousand a month for your trading capital.

2. First things you have to do is learn the basics, be familiar with market moves and know what causes them, and know your emotions in those new situations. You may not believe it, but mental aspects are responsible for 60 to 80% of your success in trading.

3. Treat trading as a business that requires knowledge gathering and serious investments.

4. Treat trading as a business that requires knowledge gathering and serious investments (think about it twice because it is that much important).

5. After getting familiar with the platform, open a micro account [1 pips = 1 cent, so $200-300 should be enough] and start trading.

6. If you cannot manage to get profits with a micro account, you will not be able to get anything with a standard account as well. Bigger lots are not a proper way to get motivated. If trading micro lots is boring – you should know that you should be feeling like that! But if it is too big of a burden – maybe you do not have what it takes to be a trader and the best way is trying to realize yourself somewhere else.

7. Get familiar with a few systems that are based on different timeframes. The simpler they are – the better. They should not use more than three indicators.

8. You might be surprised, but here in Forex trading slower means faster and less means more.


„Most beginners nowadays are over-leveraging, emotional and always looking for the Holy Grail that never exists. A trader does not need to have a big capital investment, but rather, he needs to know that for 2,000 dollars as principal capital, he should not risk more than 3% on a single trade. It is usually by over leveraging oneself that leads to margin calls, thus became emotional and act irrationally. Therefore, a trader should look to change his mindset within, not looking outside for solutions.”

Wilson Neo in „Conversations with Forex Market Masters”

“Don’t trade with what you can’t afford to loose an old cliché but very important and make sure you have enough to trade with in the first place. No business starts with such low funding that they can’t pay employees or other bills and if they do they don’t last long. If you cant afford a starting capital paper trade. Get some practice in while you save enough to start realistically trading with.”