Well let me give a few thoughts... First-the $250 carrot they dangle in front of you, after you have gotten all excited from trading their Demo at full lot sizes and been teased with thousands of dollars flowing around like gravy, is a carrot--its bait to get you to jump in to trading live earlier then you should be. All brokers do it--some of the better brokers let YOU try your demo at a account balance and leverage YOU set to practice for more realistic conditions..they just dont usually TELL you that you can do this or request this of the Demo.
Also, Brokers know the newbie mistakes made en-masse--and they take advantage of those predictable mistakes. They are in business--they know that its a fact that most Forex newbies begin trading live with real money much sooner then they should because of this carrot and the huge demo you got teased with.....and its a fact that nearly every newbie will LOSE their enture account within the first 3-6 months of trading. Brokers are there to make money--they would prefer you give them the $250 rather than collect their pip spread commission. Every newbie will blow out their account at least once if not twice...I know I blew mine out (at least 4 times) before I got a clue..everyone does it. The more you can put off starting out with real $$ and blowing out your account--the more time you can spend LEARNING how to trade Forex...and the better your odds at surviving when you really do start with real $$. When a trader is ready--when you have demo or paper traded with success and devloped a method that works and has been tested and you have months upon months of testing done--the minimum I suggest folks start with for real is $500-$1000... Why--cause you are able to endure more swings--and your risk is proportional to safer and smarter trading.
Brokers know that if you are trading with a $250 account--your Risk percentage is MUCH MUCH higher than what is considered "safe" trading practice. In theory and practice you want to risk NO MORE than 2% of your account on a trade...with a 200:1 leverage on a $10k Lot, that is $50 minimum cost fronted per trade. With $250 in your account and you put $50 on a trade--you are putting up 20% of your account on ONE single lot trade. Add in your stop loss--and you increase that risk to 25 or 30% or more. When you take a hit/loss--that risk percentage to trade increases as your account decreases in size--to the point where your account is risking 50% or more on a single trade--and your broker knows that they pretty much have that money banked for themselves by then. Even with $1000 in your account--$50 plus a stop loss is much MORE than 2% (its 5% or more). Its a safer margin for enduring a hit--but its still a risk.
Realistically, I run into very few folks (myself included) who can do this 2% practice without having a significant account balance or without trading micro-mini's for cents per pip.. Most folks risk sometimes 50% of their account on a trade cause they do not factor in money management for trading--and when they take a hit or loss--that is a significant loss and bad money management. In my opinion--and only my opinion as you will read the 2% rule from EVERY expert out there, but trading any more than 10% in my view on a trade risk is suicide..and many will say my view of 10% is just SLOW suicide.
But I never trade more than 8-10% risked in total....but its the risk I assume and can afford, and what I have tested that works for ME (and me alone--this is NOT a rule everyone should or can afford to follow). I can't trade with strict 2% of my account or method of long term trades, and still endure the swings of the market. My account is more than $1k--but iuts following what is proportional. If I placed my stops to maintain a 2% window at that level of $500 or $1k in an account--I would get stopped out every time I traded. So while 2% is the universally stated advice--in real practice unless you are trading with a large balance to begin with, or are trading micro's, it is not easy to do... The more money you build into your account for a trade--the easier it is to get to that 2%-5% and the safer your account trading will go for when trading mini-lots...
When I did my test at the beginning of the year--I stuck with $500 minimum...I traded single lots at first or a double with a tight stop...and I was extremely picky on my trade plans, and the number of trades and so on. I did not trade 50 trades in a day--I made one and stuck with it. I had to be strict with myself...but once I made it over $1k tho--I was able to start expanding my trades to all double lots... By the time I made it over $3k--I was able to do a lot of the trades and targets I had wanted to do and have multiple trades open at once.. But it all starts with taking small careful steps.. The theory of taking $250-$2500 is a real theory and IS a doable one--but again it requires time, a strict strict methodology and detailed trade planning, luck and optimal market conditions. Currently--ask any trader and they will agree that the market blows goats right now..rangebound and uncertain of any direction. Yes trading is possible--but to do the challenge you are putting forth you need LARGE gain potentials and a preferred strong trending market, and right now we do not have that. IMO you need to have those large swing moves and a stable market to get you thru your first few trades and make some gains to increase your account to breathing room...cause even just 2 hits at $250 account will be devastating to staying alive beyond another trade or two.
We can still do the teaching--I'm all for that and everyone knows I'll gladly answer or share any info requested... But I'm just giving you the realism to the theory....
-w
$250 - $2500 mini to standard question
