#784 - How Much Do You Need To Start Trading?

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “How much do you need to start trading.” I think this is a two-part answer. I think the first part of this answer is if you’re going to start trading and just learning the mechanics, learning how brokers work, how order entry and position flow works, then you don’t need any money to do that. You can use a paper trading account at many of the brokerages that are out there and start to get a feel for the mechanics and the way that the markets work, how pricing works, how positions react to different news environments. That is all something that you can do for free. Now, we do suggest that people start paper trading and use paper trading for what it’s meant to be which is this mechanism by which to practice a lot of different repetitions in order entry and trade management and rolling, etcetera. When you start gravitating towards actually really trading, so starting to actually put some money at work, I think you do need a little bit of starting capital to really make a good go with this.
Do I think that $1,000 is enough? No. I think that something around $5,000 is probably a good starting point. Could you do it with $3,000? Sure, but you’re not going to have enough capital available at $3,000 to really leverage the power of distributing your trades across different uncorrelated tickers and keeping your position size low. I think it’s really in your best interest if you are going to start trading, that you try save up at least $5,000 to start. I think you could do it with $1,000, I think you could do it with $3,000, but you really put yourself into a hole with those types of starting account balances because it’s going to force you to trade larger position sizes as a percentage of your account and that, by virtue of the fact that we’re trading a high probability system, will lead you into making decisions that you might not have otherwise made had you had a little bit more starting capital and a cushion. Hopefully this helps out. As always, if you guys have any questions, let us know and until next time, happy trading.