The experience of trading can be greatly affected by the size of an account. Traders starting with relatively large amounts of money often have the belief that more money in the account leads to greater success. Often, the opposite is true. Having a large account before you have acquired proven skills is an invitation to simply losing more money. Yet, size does matter in trading forex because alternative account sizes generate different combinations of strategies and tactics. In a sense, each account size could be seen as presenting different challenges that should be mastered. Let's explore some of them.
Level 1: The $5000 First-100-Trade Challenge
In beginning to trade forex, the account size should not be less than $5000. At $5000, one has the ability to put on trades and strategies that can be used in any size account. In a $5000 account, you should put on a standard lot amount ($100,000) only when you recognize a very high-probability setup. A 20-pip loss in such a trade would represent a $200 decline, which is a 4 percent decline. In the early stages of trading experience, a sequence of losses with big lots could wipe out the account.
The best approach for a $5000 account size is to trade at $1 per pip and the most $2 per pip. This means placing $10,000 trades and $20,000 trades. The objective at this stage is to achieve a measure of competence, not a measure of profitability.
A $5000 account size should ...