What is trading capital?
It's the amount of money available to a company or individual for the buying and selling of various assets. To be involved in trading, it is essential to have access to trading capital.
Where have you heard about trading capital?
If you've already started investing, trading capital was probably one of the first things you thought about. It's essentially how much money you have to make trades.
What you need to know about trading capital...
Each securities market has a legal minimum of trading capital you are required to have before you are allowed to start trading. This is to ensure you have enough to handle any losses.
For day trading in the US, the legal minimum balance in a trading account is $25,000. However, by investing through a broker it is possible to operate using a significantly smaller trading account, often allowing trading capital of as little as $150.
Many investors recommend traders don't spend more than one per cent of their total trading account value on any single trade, in order to make sure a loss only has a limited impact.
Leverage can be used to magnify someone's trading position, with the proviso that it would leave a company or individual exposed to higher losses if the trade went wrong.