How much money do you need to trade?
12:01, 23 January 2019
A lot of people that consider trading ask themselves, “how much money do you need to trade?” A common misconception is that you need a lot of money to begin trading.
There is this befuddled image that investment and trading are exclusively for the better-off in society. This simply is not the case. There is no set amount needed to start trading. However, you will need enough to cover your broker’s minimum deposit, and ideally enough to allow you to cover your first few trades.
To trade shares you would need to be able to afford the price of one share in that company. For blue-chip stocks, this can be in the $1,000s. However, with popular financial instruments like CFDs, you can now buy derivatives in unit increments as small as 0.1 of a contract, representing 10% of the share value, making financial markets more accessible.
How to get greater exposure to financial markets: leveraged trading
Leverage is a key feature of CFDs. A contract for difference (CFD) is a popular type of derivative that allows someone to trade on margin, providing greater exposure to global markets.
When trading CFDs, you do not buy the underlying asset itself. Instead, you buy or sell units for a given financial instrument depending on whether you think the underlying price will rise or fall.
To trade, you are only required to pay the margin value of the trade. Essentially, you borrow the leverage value from your broker, meaning you have greater exposure to the markets given your initial capital, but remember this can amplify your losses too.
CFDs also provide greater accessibility to markets given the fact that you can purchase the contract in non-integer values from as low as 0.1. Trading CFDs, like all trading, comes with associated risks; these risks can be managed with stop-losses and other risk management tools.
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Leveraged trading: making your first trade
From as little as £100, our minimum deposit, you can start trading today with Capital.com. We offer a range of CFDs on over 2,000 shares, indices, currency pairs, commodities and cryptocurrencies.
Once you have deposited and chosen a market to trade, you can use leverage to make trades that only require a margin in the single figures. For instance, to trade one Sainsburys CFD contract at £2.79 with 5:1 leverage, a trader is only required to pay a margin of £0.56, with the money from leverage equating to £2.23.
So, the answer to the question, “how much money do you need to trade?” is simply the amount needed to cover the minimum deposit. Leveraged trading and small minimum deposits ensure the markets are now only a few clicks away.
Important: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.