Are 500 Dollars enough? | Forex Factory

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Are 500 Dollars enough?

  • #1
  • First Post: Jul 18, 2007 10:56am Jul 18, 2007 10:56am
Hi ladies and gentlemen,

no this is not the repeated dumb question if a small dollar amount is enough to trade forex. I would like to know if 500 dollars are enough to internalise the psychology of trading. You have to know, however, that I have total savings of about 6000 dollars and I need a bit of this money for college. I am 19 years old and could afford losing 500 dollars, but there would also be some pain involved if I lose it. It would, however, not endanger my living. I read in some books that for getting the psychology right losses should really hurt, but I do not want to lose so much money. If I started a demo account, I'd trade with micro lots, equaling 10 cents per pip for EURUSD. I normally use a stop between 50 and 100 pips so that would be 1 to 2 percent of my equity. Do you think this is a reasonable plan for learning how to trade with special consideration of the psychological components?

Yours sincerely,
Chris
  • #2
  • Jul 18, 2007 11:11am Jul 18, 2007 11:11am
Quoting creeper
Hi ladies and gentlemen,

no this is not the repeated dumb question if a small dollar amount is enough to trade forex. I would like to know if 500 dollars are enough to internalise the psychology of trading. You have to know, however, that I have total savings of about 6000 dollars and I need a bit of this money for college. I am 19 years old and could afford losing 500 dollars, but there would also be some pain involved if I lose it. It would, however, not endanger my living. I read in some books that for getting the psychology right losses should really hurt, but I do not want to lose so much money. If I started a demo account, I'd trade with micro lots, equaling 10 cents per pip for EURUSD. I normally use a stop between 50 and 100 pips so that would be 1 to 2 percent of my equity. Do you think this is a reasonable plan for learning how to trade with special consideration of the psychological components?

Yours sincerely,
Chris
Just take your time, it might even be better to start with $250 while you're cutting your teeth on this. If you make good progress chuck the other $250 into boost whatever you've built your account to.
You've got an old head on young shoulders, so I think you have a future.
  • #3
  • Jul 18, 2007 11:26am Jul 18, 2007 11:26am
Quoting creeper
Hi ladies and gentlemen,

no this is not the repeated dumb question if a small dollar amount is enough to trade forex. I would like to know if 500 dollars are enough to internalise the psychology of trading. You have to know, however, that I have total savings of about 6000 dollars and I need a bit of this money for college. I am 19 years old and could afford losing 500 dollars, but there would also be some pain involved if I lose it. It would, however, not endanger my living. I read in some books that for getting the psychology right losses should really hurt, but I do not want to lose so much money. If I started a demo account, I'd trade with micro lots, equaling 10 cents per pip for EURUSD. I normally use a stop between 50 and 100 pips so that would be 1 to 2 percent of my equity. Do you think this is a reasonable plan for learning how to trade with special consideration of the psychological components?

Yours sincerely,
Chris
Chris,

I am pleased to see that you are placing emphasis on the pshycology of trading. This is definitley an area most new traders never fully understand at first or for some never even take into account.

I believe you have already anserwed your own question if you re-read your post back to yourself but never the less I will provide my feelings on this topic.

I do believe you should practice your trading with a demo account until you become profitable consistently with your trading methods over a period of 3 months. I also believe that this period of demoing should be conducted the same manner that you would trade a real account i.e. risking no more than 3% on any single trade etc.

That being said even during your demo period I DO NOT believe you prepare yourself 100% phsycologically for the effect of having real money in the market. What it does do is it creates affirmation that your methods work in the market place provided you stick to your rules and do not conducting trading on impulse rather than the rules your plan calls for.

So is $500 enough for you to feel the effects of market pressure and what it feels like to have the market move against you? Is $10,000 enough to have in the market? Is $50 enough?

The bottom line to this part of the question you have already learned from your reading and expressed in your original post. NEVER PUT MONEY INTO THE MARKET YOU CANNOT AFFORD TO LOSE!

So kudos to you my friend for putting real thought in to this area of trading.

Steve
Nothing is impossible, with a willing mind!
  • #4
  • Jul 18, 2007 9:46pm Jul 18, 2007 9:46pm
creeper..save your money until you have a system.!. $500 could go
in ten minutes in the wrong type of trading. If your thinking some type
of mumbo jumbo pschological thought fear/greed analysis is going to work !
Your will lose. "technical" analyis on small time frames --- ie under 1 hr or less is a waste of energy. Markets under 1 hour will not give you a good technical reading and I don't care how many elliot wave books your read.
Your better off on the 4 hour stuff. and spending your time learning how to program in metatrader and testing every ea you can possibly find.
There are a lot of good brokers than you can trade for .01ct per trade to make your money last months. If you go in on single trades stops your are better off giving it to charity!
  • #5
  • Jul 18, 2007 10:34pm Jul 18, 2007 10:34pm
Creeper, $500 is certainly enough. I would even suggest using micro lots or .10c/pip trades. You will toughen your pyschological response to trading more than you ever would with demo trading, even though it is just this small amount. You also will not ever run out of your $500 this way, you will find a system that is at least 50/50 before you lose it .
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #6
  • Jul 18, 2007 10:39pm Jul 18, 2007 10:39pm
Quoting creeper
Hi ladies and gentlemen,

...I would like to know if 500 dollars are enough to internalise the psychology of trading...
Yours sincerely,
Chris
The psychology perhaps but reality... Only if you can make it Grow AND Supliment it by Adding Deposits.

Personally, I would consider it as your Alter Education. ie Play it without looking for retirement from it until you can feed it sufficiently.
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  • #7
  • Jul 19, 2007 7:45am Jul 19, 2007 7:45am
  •  dado26
  • | Joined Mar 2007 | Status: Plan your trade and trade your plan | 180 Posts
Great question. I think it is certanly enought.Take it as a investing in learning as you payed for a self-learning course. Strugle to stay in forex for a year or two with constantly trading your DEMO-TESTED SYSTEM( not to stay with same account without trading). Along the way you will learn something about market and what is the most important thing-you will learn something about yourself.
Alow yourself to trade another day... one day it will be one of those AHA-days and you will become better and better.....
  • #8
  • Jul 19, 2007 7:51am Jul 19, 2007 7:51am
Thanks for all the replies. I take your advice and will firstly work on system development and I am going to do extensive testing in the next few weeks. I really have no clue about programming. Is it necessary for testing or can you do the same manually? I just go back in the charts and look where my system would have given an entry signal and where I would have got out. I am currently looking at the major trend on the daily chart and use 4 hour charts for entry signals. When the 5 EMA crossses the 10 EMA I get in. There are some great trades like the recent GBPUSD rally but I get whipsawed a lot too. Furthermore I do not know when to get into a trade. Often the EMA touch and the moving averages even cross but then the market reverses and the moving averages just move side by side but dont cross and eventually move apart.

0,1 cent sounds great. Maybe I am going to start with this pip amount in a few months, maybe with 1 cent.

Bemac: I do consider it as an education. I am learning and when I become profitable I'll put in more money. At the moment my goal is not making money.

As for brokers, do you agree that Oanda is an honest and good broker? I have seen they offer variable spreads but I think this would not impede my system.

Cheers,
Chris
  • #9
  • Jul 19, 2007 7:55am Jul 19, 2007 7:55am
  •  dado26
  • | Joined Mar 2007 | Status: Plan your trade and trade your plan | 180 Posts
.......and something else...
when paying self-learning 500$ course do not demand money in return.Just trade your system with your allready determined MM rule and you wont be whipsaw your account. Possitive thing is that you have to be wrong 33 times in a row to blow it but you wont becous you backtested your system.
The more AHAs you get more succesfull you ll be........
Look for AHAs not for money......
  • #10
  • Jul 19, 2007 9:15am Jul 19, 2007 9:15am
Creeper,

There have been many suggestions in this thread but the reality is this; there are a number ofthings that you absolutely must have before entering the market with real money.

A system
A solid understanding of technical analysis
An understanding of indicators and how they can help and hurt you
A solid trading plan
A solid money management plan
A handle on your emotions

When the time is right then you find yourself a broker who will fit your trading style. I personally use Interbank FX.

What you do not need are programming skills and EA's (expert advisors). If you so choose to aquire programming skills in the future to help customize your trading system then so be it. But it is definitley not required.

As for a system. It is an abosolute must that has been forward tested not back tested for a minimum of 3 months. Unless of course your backtesting involves going through your charts Bar by Bar.

Good advice has been given here about staying away from intraday time-frames (15M, 1H etc) heed this advice my friend it will serve you well. Many new traders coem to the forex markets because they can start with a small funded account and access the market 24HR's a day. Then they try to scalp their way to riches. This is where most new traders get killed. Couple this with poor money managament and you are sure to blow a couple of accounts.

Learn on the Daily and weekly charts and then scale in to further trade the shorter time frames.

And never think that you have the markets licked.

If you really want to get a handle on technical analysis and how to apply it this is my suggestion.

Pick up Martin Pring on Price Patterns. It's a great book. Secondly visit this thread http://www.forexfactory.com/showthread.php?t=2331

This is the James16 Chart Thread. This thread is extrememly active and long but start from the begining and work your way through. You will learn a ton of stuff that you can begin practicing immediately.

And as always if you have questions I encourage you to ask. And if you need to you can PM me.

Best of luck to you,

Steve
Nothing is impossible, with a willing mind!
  • #11
  • Jul 22, 2007 8:56am Jul 22, 2007 8:56am
Quoting StockKJay
Creeper, $500 is certainly enough. I would even suggest using micro lots or .10c/pip trades. You will toughen your pyschological response to trading more than you ever would with demo trading, even though it is just this small amount. You also will not ever run out of your $500 this way, you will find a system that is at least 50/50 before you lose it .
I second that. Or, go with $250, after 3 months if you are still game, put the other $250 in.
  • #12
  • Jul 22, 2007 9:34am Jul 22, 2007 9:34am
Quoting creeper
Hi ladies and gentlemen,

no this is not the repeated dumb question if a small dollar amount is enough to trade forex. I would like to know if 500 dollars are enough to internalise the psychology of trading. You have to know, however, that I have total savings of about 6000 dollars and I need a bit of this money for college. I am 19 years old and could afford losing 500 dollars, but there would also be some pain involved if I lose it. It would, however, not endanger my living. I read in some books that for getting the psychology right losses should really hurt, but I do not want to lose so much money. If I started a demo account, I'd trade with micro lots, equaling 10 cents per pip for EURUSD. I normally use a stop between 50 and 100 pips so that would be 1 to 2 percent of my equity. Do you think this is a reasonable plan for learning how to trade with special consideration of the psychological components?

Yours sincerely,
Chris

For $ 500:

As long as it is ok if you loose it.
Dont think that demo trading is like real trading. It isn't.
Use demo to learn a chart package or to test out a system or to watch price.
Use micro lots to trade as you have stated
Trade larger time frames but realize that they require higher stop loss.
Follow advice of successful traders here. For instance James 16 thread.
There are other methods on the forum that may suit your style and schedule.
You have thought a lot of this out already.
Off to a good start.
  • #13
  • Jul 26, 2007 5:41pm Jul 26, 2007 5:41pm
Quoting creeper
Hi ladies and gentlemen,

no this is not the repeated dumb question if a small dollar amount is enough to trade forex. I would like to know if 500 dollars are enough to internalise the psychology of trading. You have to know, however, that I have total savings of about 6000 dollars and I need a bit of this money for college. I am 19 years old and could afford losing 500 dollars, but there would also be some pain involved if I lose it. It would, however, not endanger my living. I read in some books that for getting the psychology right losses should really hurt, but I do not want to lose so much money. If I started a demo account, I'd trade with micro lots, equaling 10 cents per pip for EURUSD. I normally use a stop between 50 and 100 pips so that would be 1 to 2 percent of my equity. Do you think this is a reasonable plan for learning how to trade with special consideration of the psychological components?

Yours sincerely,
Chris

Hey man....trust me on this, ANY amount of money is good for learning.....like the second poster said, even 250 is enough. Just that it will cut the size of your lots, but who cares? If you are like 99.99% of the traders out there, you first trade isn't going to double your account.

And if it does, you probably played too large....don't worry, as a newbie, you will give it up.

But, hell.....trust me, even losing a penny a pip can be frustrating. You will learn it isn't even the money most of the time, but something obvious that was telling you not to get in, eventhough you ignored it.

Yes, a small account is the way to go. And to be honest, Demo is great for testing out a system.....but it NEVER can replicate what the mindset will have to be.

I think you are taking the smart route on this one. Oanda has micro accounts, but I don't think trailing stops, if you plan on trailing stops, then you will have to look elsewhere.

I use Interbank FX, and they have the micros and trailing stops. Also, a small word of advice/opinion, use Metatrader, every indicator in the world is out there for it.
  • #14
  • Aug 12, 2007 1:21pm Aug 12, 2007 1:21pm
go live after u've armed urself with automated systems that has been backtested and freshtested.

its good to know programming. when i was in demo, i felt the pain when i lost money. for me, i couldn't handle watching the charts sitting on my ass. naturally, i had the computer do that for me, and its less stressful, and profitable!

also 500 is enough to start with "ecn" like MBT. im going to give it a try soon.
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  • #15
  • Aug 12, 2007 2:36pm Aug 12, 2007 2:36pm
Do you understand the concept of "Risk Capital?" meaning that if you Lose it All, it wont change your lifestyle.
If $500.00 represents that amount for you then split it in half & make a booking for 2 kicks at the cat.
  • #16
  • Aug 17, 2007 8:31am Aug 17, 2007 8:31am
Give the 500 to your mum, let her buy herself sth nice. Then open a demo accnt with 500 $ and set your goal to break even. You'll lose that too, and then you will tell yourself that it was because it was demo.

Anywhoo, good luck trying.

PS. Do stick with the psychology thing, read Trading in the Zone by Mark Douglas.
  • #17
  • Aug 17, 2007 8:44am Aug 17, 2007 8:44am
with micro lot 500$ is definitely OK, you will have the stress of the money factor but wont lose your shirt if your account blows out ^^
  • #18
  • Aug 17, 2007 10:50am Aug 17, 2007 10:50am
I think 500$ enough If you trade at liteforex
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  • #19
  • Aug 18, 2007 3:07am Aug 18, 2007 3:07am
It can be done
  • #20
  • Last Post: Jan 30, 2009 9:36am Jan 30, 2009 9:36am
Quoting Trader_V
Chris,
NEVER PUT MONEY INTO THE MARKET YOU CANNOT AFFORD TO LOSE!

Steve
IMO, that's the best tip because as you may know, Forex is quite risky if don't know how to gain from it.
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