How to Start a Trading Business with $500

How to Start a Trading Business with $500

Heikin Ashi Trader

SPLENDID ISLAND

1. How to Become a Trader with only $500 at Your Stake?

Most new traders, when starting out, have a small account. The sum may be different, but almost all of these traders start with the desire to increase this small capital sum quickly. This need is natural and understandable, but the urge to do so fast is the seed for future failure. Whether they start with $500 or $1000, most beginners feel that they are only a small fish in the stock market. They want to change this as quickly as possible.

They believe that the only way to get to a big account is to multiply their little account fast. Because then, if the account is large enough, they can quit their job and make a living solely from trading. As such, they begin to look for trading strategies that promise them the highest possible returns. That these strategies usually are associated with high risks, they stubbornly ignore and plunge headlong into the adventure of trading.

The result is that most of these $500 accounts no longer exist after a maximum of 3 to 6 months. The statistics show that this is the likeliest outcome. If you start trading with the need to increase your account fast, you will give this goal all your energy and attention. This means that you will not focus your energy on what you are supposed to do first: to become a good trader, hence, to acquire good trading habits.

Even if you have access to more substantial funds, I would still advise you against transferring these funds to a trading account. You are at the beginning of your trading career and certainly not yet in a position to manage this capital effectively and responsibly.

First it is wise to learn to trade only a small account. If you only have about $500 or even less to trade, I see it as an advantage rather than a drawback. I understand the desire to make money fast all too well, as I had this need too when I started. This need led me to concentrate on multiplying this little capital fast, rather than, learn the craft.

Admittedly, $500 will not get you far. However, it is important that you learn to appreciate even this small sum and deal with it responsibly. As responsibly as you would if it were actually $500,000. Irresponsible is, of course, the use of disproportionate leverage that most brokers, unfortunately, make available. With $500 you can actually trade $50,000 with many forex brokers, but that does not mean that you should do it.

In my experience, most beginners overleverage themselves in the market. For example, I have traded more than $200,000 in capital with only $2000 in my account. This naturally means stress and a lot of adrenaline. While some individuals are specifically seeking these thrills, it is an unprofessional trading technique.

The result is that these traders, hold far too long to loss positions, and hope that the market will graciously turn, so that they can at least approach breaking even. There is a well-known internet video of a trader who allowed his losing position to grow to $ -30,000. He could not believe that the market had not followed his analysis and merrily ran against his position. This recording was the apotheosis of a completely unprofessional approach. You will definitely not become a professional trader in this way.

In addition, most beginners have exaggerated