How much capital do day traders need

The necessary start-up capital for day trading / trading

One of the most common mistakes beginners make as traders or day traders is starting with too little starting capital.

Often with the intention of risking less at first and carefully trying out the whole topic. But why this is sometimes a mistake and how much start-up capital is necessary for the various financial products such as CFDs, Forex, stocks or raw materials, I will explain to you today.

Basically, day trading is risky and the consideration of risking less capital as a beginner is of course initially obvious. Too little start-up capital, however, is one of the 10 most expensive mistakes that beginners often make.

Too little start-up capital is a critical mistake for many beginners

You cannot control the market and within a certain framework, no matter how good your strategy is, day trading and the outcome of a single trade is always a matter of chance!

The solution is a reasonable oneRisk managementas presented in the book, course or trading plan.

In a nutshell, risk management means that you limit the maximum amount that you risk in a single trade.

Note: Beginners should not risk more than 0.5% to 1% of their starting capital in a single trade!

You can't control how far the market rises or falls, but you can always place a stop-loss order to limit your losses.

This is a very important basic rule for successful trading. Always put a stop and limit your losses.

This is exactly where the problem lies with too little starting capital when trading: If you have too little start-up capital, proper risk management is no longer possible.

In the following video I have summarized again how much start-up capital you need at least for the different financial products when trading.

How much start-up capital is necessary to trade on the stock exchange?

The video is hosted on YouTube. Click on the play button to play the video from there.

What does the seed capital depend on?

The following factors have an influence on the necessary capital:

  • The minimum deposit at the broker - often between 100 and 500 euros (Note: With the broker AvaTrade recommended by us, you can start trading from 100 euros)
  • Your risk management - you shouldn't risk more than 0.5% - 1% of your capital per trade
  • The strategy - short-term strategies often have lower fluctuations and require less capital, whereas longer-term strategies require you to sit out larger fluctuations.
  • The traded financial products - whether forex, CFDs or stocks, etc.
  • How much money can you risk?
  • Your gut feeling: This is also a very important aspect that you feel comfortable with the amount. I have also been trading with significantly less capital than my trading account would have allowed for several years, simply because it didn't feel “good” to bet such large amounts. This is not a specifically measurable value, but that's why you should simply listen to your gut feeling here.

Start-up capital for trading / day trading with the various financial products

Before I go into the individual trading products, the first hurdle is of course the minimum deposit with the broker.

In the list of recommended brokers on this page, you will also find the minimum amount required, which is between 100 and 500 euros. There are also brokers who charge at least 10,000 euros or more, but these are usually unsuitable for beginners.

Note: Even if you just have the 10,000 euros left, I do not recommend starting with such large amounts. For beginners, the main thing is to get started successfully and learn the trading strategy and trading basics. Such a large trading account is not necessary for this.

Note: The following values ​​are guide values; their derivation is explained in more detail in the video.

Forex trading

In forex trading, you can use the popular EUR / USD currency pair, which is the most widely traded currency pair in the world, from approx. 100 euros Trading in the smallest position size and with a maximum risk of 1% of the total starting capital per trade.

Forex trading is therefore usually a good choice for beginners. In the list of forex brokers you will find the providers you can start with right away.

CFD trading

The most popular product for CFD trading is the DAX. In order to trade the DAX sensibly in the smallest position size, you should at least use 400 euros start-up capital start with a maximum risk of 1% per trade.

Equities are also very popular for CFD trading. For example, if Elon Musk tweets again, the price of Tesla shares can fluctuate enormously and thus offer great trading opportunities. Here the specific need then depends on the value of the respective share and the selected leverage.

Stock trading

If you want to trade stocks directly, without leverage, the start-up capital is easy to calculate, but you need a much larger trading account to be able to trade profitably at all. Because you have no leverage, your starting capital is as high as the price of a single share.

However, it doesn't make sense to buy a single stock. The order fees are in most cases unnecessarily high, so that you will hardly make a profit and you will also tie up the start-up capital.

As a trader or day trader, it is therefore unusual to trade shares directly and leverage products such as CFDs or options and foreign exchange are traded.

Is trading also possible without start-up capital?

This is a common question, and the good answer is yes.

For example, you can start with a free demo account at AvaTrade. You can practice day trading for free, have no risk and receive a virtual start-up capital of 100,000 euros at the start.

But it is important to know that the biggest challenges in day trading are in your head. Greed, fear of loss, and other trading psychology issues are what make most traders lose.

In a demo account, you often don't have such problems. There are also some technical differences between demo accounts and real money accounts. On demo accounts, for example, the orders are always executed immediately and at the current price, but this does not always have to be the case on the real market.

Without going into all the technical details: Yes, it is also possible without start-up capital and, for example, you can open a demo account here for free.

This is sufficient for a brief insight and to get a feel for the topic of trading.

But you should be aware of the fact that just because you are successful on the demo account does not necessarily mean that you can transfer it to a real account.

But for practicing, for familiarizing yourself with the trading software or for testing new strategies, a demo account is still a good choice.