Small Starting Capital

Hey FF Traders,

Ive been trading now for couple of years and one of my former co workers has been demo trading from September through December to practice. I helped him out on a trading method by trading chart patterns (Wedges, Triangle Breaks etc) Also recommended him the book Encyclopedia of chart patterns. Anyway, he went live in January and followed his progress on an excel spread sheet. I saw his results and IMO they were pretty good (He says he used 10K - 20K lots) here is where we disagreed. he feels he can use 60K - 100K lot size on a starting capital of $2,750, IMO he will get a Margin Call in no time. He has that mentality of, "Yeah but at $10 a pip i can make $1,000 quick" of course we all have been there when we started but i suggested this lot size plan with careful and patent entries,

$2,000 - 10k
$3,000 - 20k
$4,000 - 30k
$5,000 - 40k
$6,000 - 50k
$7,000 - 60k
$8,000 - 70k
$9,000 - 80k
$10,000 - 90k
$20,000 - 100k
$30,000 - 200k
Etc.... Is this too risky? According to his excel sheet he started with $2,750 and now has $3,398
This was his results for the month,

45 Winning trades
58 Losing trades
Winning % 44%
Return of 23.6%
He has a load of losing trades, however ALL his losses were between 0.05% - 2% risk. Anyway overall i think he did well using 10K lot size even though he had alot of losses. What are your thoughts?

My wife trades mini-lots live, started with $900 USD since Oct, now over $20K and still trading mini-lots.... Just as long you manage your trades, and not let it get the best of you... I am still amazed how she can rack up those PIPs trading mini.....

Starting with snall amount like 100$ to 500$ is the good practice. One should not investment big amount unless he makes his small amount 3 times with a systematic approach.

Yeah i agree with hisao, i recently started trading last november and invested $50 and pretty much it went down the drain in just a month. I tried again with $100 i borrowed from my older brother last december and today its going pretty good. I learned from what i had burnt last november, we could share tips and tricks here as im also trying to self-study forex so i hope we could all help each other. Good luck to us all!

My first comment is if your friend is risking 2% a trade, then the risk is controlled. Leverage or not the loss would be the same.

Secondly, your friend’s plan has an increasing leverage, from 10k lot / 2000 (1:5) to 200k lot / 30k (~1:7) usually a sustainable plan is to go down as capital increases. He may want to review this part

lastly, it also depends on the account leverage limit. If his broker offers 1:20 leverage, then 1:5 has no problem. It needs a 75% drawdown to get a margin call.

I think your friend should evaluate his expectation. Although it seems his management is far from a margin call and had success in the past month, the reality is maintaining this high gain is statistically unsustainable (otherwise all of us will be very rich). Consider very rarely there are traders with monthly growth of 60%, there must be something your friend hasn’t encountered yet.