The old-age question, How much do I need to start trading.? A question asked by most new traders when they get into trading. This question is broad and needs a detailed answer.
At Rhodium Investments we tried to break it down for you, the real answer is “It depends on how much you have”. There is no set amount to start with, some brokers allow deposits as low as R50. What you need to understand is to lower your expectations when depositing such a small amount. You won’t turn R50 to R1 Million, maybe you can, but the chances of that happening are very low almost close to impossible.
Look at it this way, say John deposits R50, Peter deposits R5000 they both trade the same instrument of course with different volumes. They both make a 20% return on their investments. The real question would be twenty percent of how much. Whoever made a bigger deposit is going to get a bigger return from their investments. That’s why you should always look at your returns based on percentage returns, not the amount. If you make 60% per month from R500 it means you’ll also make 60% from a one million rands account. The market can’t distinguish between small and large it just gives and takes.
Another thing one needs to note is that the Markets traded vary from one other. Eg instruments such as the Nasdaq can’t be traded on an R50 account, this is due to the high volatility of the instrument. Although some brokers offer what’s called a micro account for traders with small accounts. A micro account shrinks your positions down to cents.
The instrument you are interested in trading is a big contributor to the amount you need to deposit. Say you want to trade the Nasdaq, a reasonable amount would be at least R5000. With a bigger account is easy to trade, you also get to see the profits you’re making, a ten percent gain on R5000 is +R500 while on an R100 it will be +R10.
Inconclusion, I’ll say the minimum account you should start with should be at least R5000. That’s taking the fact you’ve been practicing on a demo account or got some training and proper mentorship.
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