Table of contents:
Now we come to the first point of this video. Before I mention numbers, I would first like to talk to you about your expectations regarding your trading account: do you want to use this account to learn how to trade, do you need this account to make money, or do you want to consider this account as an additional source of money that you can use to finance occasional small purchases or even a holiday.
The next point is what your knowledge is like. Are you a beginner or advanced ? Do you feel confident and have you already climbed the first steps of your trading? These levels can be divided into three parts:
Learning Phase: During this phase you take in all the information you can get and then internalize it. In this learning phase you prepare everything so that you can understand and apply it.
Application phase: In this phase you trade and learn that everything is not so simple after all and that it can only work through chart analysis. One understands that money management is extremely important, but this also applies to fundamental analysis and psychology, which must not be forgotten.
Preservation of capital: In this last phase you finally manage to preserve your capital. This is also the most important step you have to take as a trading beginner and also as an advanced trader, namely capital preservation. This is the point you have to reach, and from this point on we can actually talk about what you can expect as profit or what you ultimately need as a trading account.
Equipping a learning account with trading capital
Now we turn to the numbers: First, I’d like to propose a so-called learning account, which I will now explain. This is actually a standard model that everyone opens once, because the hurdle is relatively low. This is an account that everyone tries once. Experience has shown that the size of such a trial account is somewhere between EUR 300 and 600. This is perfectly fine as long as you meet your leverage requirements; that is, if you want to trade with a certain stake and use a relatively small amount of leverage, you should make sure that you deposit at least enough into your account to allow at least one trade to go 2% to 3% into the red without being automatically stopped by the system.
Please pay attention to the regulations of your brokers, i.e. what they prescribe for you or what they offer you as leverage and margins. Please also make sure that the deposit limit corresponds more or less to what you need as share capital. There are also brokers who allow you to trade a live account with just 1 euro or even 0 euro. However, that will not help you at all, because you cannot trade with that. Even with 50 Euros it is mostly not possible to trade with, because your capital stock is too small according to the new rules and regulations.
With a learning account, as I call it, you are on a very good path. Such a learning account is much more important than any demo account. Even if it’s only a few hundred Euros, you will achieve much more success with this learning account (especially regarding your psychology) than with any paper trading or demo trading. For such a learning account, I would recommend all sizes that you can handle, i.e. anything between 500 and 1,000 Euros is a good account size to operate as a pure learning account.
Mini-Lot trade when first experiences are made
Let’s move on to the second account model. With this account model, I assume that you have completed the three steps of learning to trade, that you have achieved capital preservation, and that you are now working to make profits.
If I start from myself, then it is, if I am completely honest, that I would like to see some profit from my trading in the meantime. I don’t want to trade for 1, 2 or 3 euros, but I want to make at least 20, 30 or 40 euros, in other words, win a double-digit amount, if not a triple-digit amount every now and then on a particularly good trade.
Therefore, only a so-called mini lot is suitable for me, i.e. 0.1 lot, and for this I also need a certain security, a certain amount of capital to be able to use the leverage accordingly.
If you want to gradually earn something with such an account, i.e. an advanced account so to speak, I would definitely recommend an account size of 2,000 to 5,000 euros. If you are oriented towards 1% or 2% risk, you can earn nice profits in the mid double-digit, sometimes even triple-digit range, and that way you are always on the safe and solid side when it comes to money management. Again, the basic prerequisite is that you create the capital preservation, i.e. that you preserve the capital, and that you also develop further in the long term.
Trade lot sizes in professional accounts
Let us now turn to the professional accounts. This is easy to explain, as it includes all accounts between 5,000 and 10,000 euros and above. From here on you can trade lot sizes, i.e. you actually fill the number before the decimal point. This is where the winnings are really fun, but the losses also hurt a lot.
If you want to trade a lot size, you have to follow the 1% to 2% rule again. You can then calculate that your account should in any case be more than 10,000 euros, in order to be able to trade well and flexibly and above all safely.
Concluding remarks on this video
First of all it is very important to me that you only use money that you can lose. I don’t want you to use money that you need for your living expenses or if you have to use it to pay off the loan for your house or buy food. In any case, you should refrain from doing so. Do not borrow money, and under no circumstances take out a loan to trade. This may not work in the long run and you will definitely be shipwrecked.
In order to trade, you have to be in the best of mental health. It’s extremely stressful when you always feel a certain pressure in the background regarding the financing of your account.
How do I see this personally? To be honest, I started out with a smaller account back then, around 500 – 1,000 euros, and that was my test account, so to speak. However, I have to say that the leverage regulations were much looser at that time. I had an account with excessive leverage at that time and then started trading with insanely large stakes for this account. I then increased my account balance with more luck than sense, but that had nothing to do with sound money management.
This is probably something that a lot of traders experience in their early days, and I think it’s kind of normal to get into that area. But please also keep in mind that the whole thing can also lead to a disaster very quickly, which ends with the destruction of your account.