There is no minimum capital needed for trend following. There is no magic number. There are many factors related to starting capital not the least of which is your own personal discipline and ability to stick with a system. Immediately question anyone who promises you a magic number of how much you need to win. No one can guarantee you profits. A top trend follower was asked, “How much do you need to trade?” He responded:
“I’d ask a trader who thinks he needs a certain amount before he can trade exactly what amount he would need to stop trading.”
There is no dollar amount too little, nor dollar amount too much.
More to consider:
- “What you’re asking about [are] rates of return, what you can reasonably make. And I’ve found that my trading style with small amounts of money allows around a 300% return.” That comes from Ed Seykota, who was profiled in Jack Schwager’s Market Wizards. He is a trend follower and traded $5,000 into $15,000,000 over 12 years in his model account.
- William Eckhardt: “I know of a few millionaires who started trading with inherited wealth. In each case, they lost it all because they didn’t feel the pain when they were losing. In those formative first years of trading, they felt they could afford to lose. You’re much better off going into the market on a shoestring, feeling that you can’t afford to lose. I’d rather bet on somebody starting out with a few thousand dollars than on somebody who came in with millions….This is one of the few industries where you can still engineer a rags-to-riches story. Richard Dennis started out with only hundreds of dollars and ended up making hundreds of millions in less than two decades – that’s quite motivating.”
- Trading equities through LEAPs® options & ETFs are for trend following too.
- FX, currency and commodities markets can all be traded with leveraged ETFs.
- Read my book TurtleTrader. Your passion to win and your self-discipline to stick with it will make the difference.
- If you don’t have enough confidence to start trading you can learn how to trade successfully by spending some time each day performing a paper trade analysis. Armed with paper instead of your hard earned money you can learn the rules and hold off actually trading until your bankroll is sufficient. This is a sensible alternative to wasting money on sub-par trading systems or worse, trading with no system at all.
Bottom line, trading is risky. You can win and can you lose. However, trading is a zero-sum game. The winners take from the losers. A solid plan is the first step toward winning from the mistakes of the losers.