HOW MUCH CAPITAL SHOULD YOU START WITH?

If I had a rupee for every time someone asked me this question, I’d have millions more. Capital is important to start trading, but how much is not the question here. What’s important is that you start taking trades.

In initial days, capital is secondary thing to focus on. First you need to sharpen your trading skills. For example, let’s say, you have Rs.5000 and you are thinking how am I supposed to take trades with such low capital. Well, if you don’t have required skill, then you are bound to blow your account, be it Rs.5000 or 5 lakhs. First learn to take trades with low capital.


If you can’t make money from low capital, what makes you think that you can make it with big capital.


POSITION SIZING:

Next question might pop in your mind is about position sizing? My answer is, start with 1 quantity, because at this point the goal is not make money but to take profitable trades. Take trades with 1 qty and see how you manage your trades. First learn to find best setups & how to trade them profitably. Finding best setups is not a big task. Any Tom Dick Harry with basic technical analysis skills can do it. What’s difficult is taking the trade and making max profit out of it. And that’s called trade management. Trade management is also a big part of trading journey on which we will write a separate blog in future.

PAPER TRADING:

For those who don’t know what paper trading means. It means nothing but taking trades on paper, like writing where you could’ve entered and where exited. But reality is far different from paper trading. In paper trading one crucial thing is missing and that is execution. Paper trading is flexible, you just watch and think that’s where I’d have entered. But in real trading it’s not that easy. Emotions are overwhelming at initial phase. In your learning phase where you try to read as much as possible about trading you might have read or heard somewhere that start paper trading first and then take trades with real money. Well, in my opinion paper trading is the most bogus thing. One might say, this is an aggressive statement to make. But trust me, paper trading won’t take you anywhere. Because it molds you in a wrong way. Let me tell you how? When you take paper trades you don’t have emotions as no real money is at stakes. Apart from money, the emotional state is the same as professional traders. And you grow with such attitude until you start with real money and reality hits you hard which in turn becomes disastrous situation to come out from. Emotions are not required in trading business. But first you have to get through all the emotional phases to get to no emotion state. And that’s why paper trading is a BIG NO!!


Start with 1 quantity but never do paper trading.


I know the heading of the blog is about how much capital you should start with and I have written very less about it. But instead, I’ve diverted you to more important things to look for instead of capital. Because that’s my experience, it’s a business where you can grow your capital to 1 lakh from 1 thousand over time with knowledge and skill. But without knowledge, 1 lakh will become zero.

Scale up after profitability

Yes, I started with 5000 rupees after I lost almost 3 lakh rupees in 2008. It’s clear that I don’t know how to trade and trading with big capital will only end up in big losses.

So I started with 5000 and experimented with different methods and techniques. It took me a while to find my mojo, but eventually, I started making consistent 200-300 rupees profits on every trade.

Then I scaled up my trading. Let me tell you, scaleup will not take time. In the next 4 months, I made +5 lakhs profit from that 5000 rupees. I was taking aggressive risks as I can only lose 5000 if I make any mistakes. This kind of performance is only possible when you have small capital and the right methods. Point is, that you do not need big capital. In fact, starting with big capital is more dangerous in trading.

So, to everyone who is asking me how much capital you should have to trade, My answer is simple. If you have 5000, you have more than enough to start the journey.


START SMALL, GROW BIG!!