How much money do you need to start any kind of business? Well, it depends on individual factors just as much as market factors.

The most important individual factors are how much capital you have available for investment and what kind of lifestyle you want to achieve from your trading.

Market factors include which country you are trading from, which currency pairs you are trading on, and which broker you are using.

Others include whether you are scalping, day trading, spot trading, or other types of forex trading. You can read more on trading styles here.

While there is no ball park figure for how much you need to start trading forex, there are simple guidelines you can use to determine what you will need as an individual.

Micro Account

In forex, trades traditionally are transacted in lots. A lot is typically 100,000 units of a currency.

However, a few decades ago when people started trading online, brokers devised micro-lots to enable traders with low capital to participate in the market.

There are brokers who will allow traders to fund a forex trading account with as low as $5.

Nevertheless, these micro accounts are usually best suited for new traders who want to learn how to profit from the lucrative foreign exchange market.

While they can learn through a demo account, a micro account offers a better real life trading experience because it involves the associated emotions of having your money at risk.

So yes, the lowest amount you can use to fund a micro forex account is $5 with non-US brokers. But this type of funding will not lead to an sustainable income that you can live off.

Mini Account

Most brokers require traders to fund a mini account with a minimum of US $1,000.

This represents 1% of a lot size. Such an investment is favored by beginners who feel confident enough to put in real money after trials with a micro account.

A mini account can provide profits that act as additional income for those trading on part time basis.

It will be very difficult to fully depend on these profits to pay your bills unless you live in a country with very low costs of living.

Full time traders usually opt to open a mini account with a capital fund of at least US $5,000 and initially the realized profits will still be a tight budgetary squeeze.

As you grow your accounts and profits then you might be able to fully live off your mini account.

Standard Account

Standard account holders typically fund their accounts with upwards of $25,000.

With proper use of margins, the account holder profits handsomely and can even confidently drop the day job. Nevertheless, with a standard account you may not substantially grow your riches.

This is because most of your profits will go to paying your day to day bills. If you grow your investment beyond $50,000, then your chances of significant profits that can be ploughed back to make more money increases. And, you can achieve financial freedom just from this trade.

VIP Account

A VIP account will open first-tier access and many other competitive advantages. Most VIP accounts are funded with no less than $100,000 though some non-US brokers offer for less.

With a VIP account, your bid and ask prices will be much better than other accounts. There is very little slippage and very low spreads.

VIP members also have access to advisors and a host of signals and indicators. All these and other competitive factors make it easier to grow rich and live comfortably.

Broker Fees

Forex brokers generally charge no fees or commissions. However, they all charge bid and ask prices which make up their spreads.

Check the small print for any charges levied by your broker when you register and all charges associated with each transaction.

The charges for making and revising orders are some of the hidden charges that can pile up, especially for traders who do not follow a trading plan.

Learn more on getting a best broker here.

Data Feeds

Among the costs you should expect to incur during your trading career is the price of data feeds.

On top of paying your usual internet service, you might need to pay for news feeds, signals, indicators, and oscillators.

Subscriptions to such news feeds go for as low as $5 per month though many charge a much higher fee.

Margin

Most forex brokers will afford you some generous margin to leverage your profits. The cost of this margin differs from one broker to another.

This cost grows exponentially when you are losing more than you are winning in your trades so be careful how you use margins.

Utilize proper money and risk management practices to limit your margin costs and overall losses.

Type of Trade

Scalpers and day traders usually rely on very small changes in prices for their profits. For this to be viable, it goes without saying that the invested money should be high.

Thus, if you gain only 0.5% it will be more meaningful if you had invested $100,000 rather than $1,000.

This is because in the latter, you will have gained $500 while in the former you only have a $5 profit.

Carry traders may need lower capital funding because their trade setup allows for much higher ROI margins compared to scalpers.

Conclusion

For a quick and straight answer, you can fund a forex account with as little as $5, but that will not earn you profits you can live on.

For a viable investment, $1,000 would do well for a part time trader supplementing income from a day job.

A full time trader would require at least $5,000 while a scalper would need at least $20,000.

To grow rich over the long term, an investment of at least $100,000 would be most sensible and viable.

Do you agree with me, or? Please provide your comments below.