Minimum Capital Required to Start Day Trading Forex

The recommended capital requirement for day trading foreign exchange.

••• Forex day trade global currencies. Getty Images

Want to start day trading forex? Thankfully the (foreign exchange) forex market is the most accessible financial market, only requiring a small amount of capital to open an account. But, just because forex brokers only require a small initial deposit doesn't mean that is the recommended minimum. Based on your goals and trading style here's how much capital you need to start day trading forex (New to Forex? Here's What You Need to Know).

Risk Management and Forex Day Trading Requirements


Risk is determined by the difference between your entry price and the price of your stop loss order, multiplied by the position size and the pip value (discussed in the scenarios below).

Minimum Capital Required to Start Day Trading Forex

Unlike the stock market, there is no legal minimum you need to start day trading forex. Therefore, you can begin trading with significantly less capital than the $25,000 required for day trading US stocks.

The forex market moves in pips. The EUR/USD may be priced at 1.3025, and the fourth decimal place represents one pip of movement.

If the EUR/USD moves to 1.3026 that is a one pip move, if it moves up to 1.3125, that is a 100 pip move.



When the USD is listed second in the pair, as in the EUR/USD or AUD/USD, the value of the pip is fixed. If you hold a 1000 micro lot, each pip movement is worth $0.10. If you hold a 10,000 mini lot then each pip is worth $1. If you hold a 100,000 standard lot then each pip move is worth $10. Pip values can vary by price and pair, so knowing the pip value of the pair you're trading is critical in determining position size and risk.

Capital Scenarios for Forex Day Trading 

Assume you open an account for $100 (the minimum initial deposit most forex brokers accept). Your risk on each trade is therefore limited to $1 per trade (1% of $100).



Assume you open an account for $500 (opening an account with at least $500 is recommended). With $500 you can risk up to $5 per trade. This provides more flexibility. You can set a stop loss 10 pips away from your entry price, and take five micro lots (because 10 pips x $0.10 x 5 micro lot = $5 risk).

Or, if it is more logical to place a stop loss 25 pips away from the entry price, then take only two micro lots to keep the risk on the trade below 1% of the account.

You can take two micro lots because 25 pips x $0.10 x 2 micro lots = $5, and $5 is the maximum we can risk on a $500 account. Starting with $500 will produce more daily income than starting with $100, but most day traders will still only be able to make $5 to $15 per day off this amount (with regularity).

If you start with $5000 you have even more flexibility and can even day trade forex with mini and standard lots (as well as micro lots). If you buy the EUR/USD at 1.3025 and a place a stop loss at 1.3017 (8 pips of risk) what position size do you take?

Your maximum risk allowed on the trade is $50 (1% of $5,000), and we can trade in mini lots because each pip is worth $1 and we only have an 8 pip stop. $50 divided by (8 pips x $1) = $50 / $8 = 6.25 mini lots, or 6 mini lots and a 2 micro lots, which is equivalent to $62,000. With this amount of capital, and being able to risk $50, the income potential moves up and traders can potentially make $50 to $150 per day, or more, depending on their forex strategy.

Leverage allows forex traders to take a position worth $62,000, while only having a $5,000 account. As long as risk is controlled on each trade, leverage is a significant advantage in forex trading.

Forex Day Trading - Recommended Capital


The amount of starting capital will also affect the income (in dollars). If looking to get an income from trading, then it is better to save up more capital than to try to start with a smaller amount that leaves you disappointed with the income produced and doesn't compensate you for the time you are putting in.