Risk Level Dictates Money Needed To Trade
Almost every retail trader starts their journey into the markets with a simple question: “How much money do you need to trade?”
The answer may appear complicated, yet it is straightforward. And the answer is critical to long-term success in building a trading lifestyle.
Some traders are willing to start their risk level with $10,000 or even $50,000 in capital (or more). Others get started with only $1,000 or just $500.
The amount you start with isn’t as important as understanding the risk – which is ultimately your entire trading account.
As an example, let’s say a trader has a $10,000 account and only wants to risk 10% on a single options trade.
That means the risk could be up to $1,000.
If options are $100 a piece, then the trader could buy 10 contracts.
Or if the capital is $5,000, the trader could buy five contracts.
And if it’s a $1,000 account, the trader could only take on one contract.
By comparison, if the trader had $50,000, then the trade could be 50 contracts for $5,000.
See how the percentage of risk is the same no matter the account size?
Taking this example further, if a trader started with $10,000 and had a 100% gain in a month, the account would double to $20,000.
Similarly, if the starting capital was $1,000 at the end the account would have $2,000.
As the examples show, it really doesn’t matter the amount of capital to trade.
So, what’s your risk level to start… or to take the next step to grow your account?
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- More governments, companies starting vaccine mandates
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- Hot economy, growth expected through end of year
We’re Watching: Potential for unrelenting chop and a sharp twist –
- Closing positions that have worked for profit
- Managing risk with cheaper options plays
- Setups that follow within expected moves