How Much Should I Deposit into your Online Trading Account?
You are well on your way to becoming an established trader at AvaTrade Australia. Yet, there is still the small matter of a trading budget to consider. It’s an important decision, since the capital you invest will allow you to place real money trades online. A series of factors comes into play when establishing an online trading budget.
Your budget is dependent upon your goals and trading style. Each person is different, and that’s why a budget tailored to expectations is so important.
What’s right for John may not be suitable for Jane, since we all have different expectations, approaches, and considerations to bear in mind. During your trading endeavours, you will come across brokers that allow you to deposit a modest amount to start trading online. The problem with making a small deposit, is that your returns are commensurate.
Conventional thinking states that day traders who open and close multiple positions during the course of a trading day require far less capital than swing traders who keep their positions open for weeks or months at a time. It is for these reasons that goals need to be established, so that you can gauge the correct trading budget.
Some folks enjoy part-time trading, while others are looking to turn it into a full-time vocation. Whatever your specific agenda, you should tailor your budget accordingly.
AvaTrade Australia recommends the go-it-slow approach by gradually increasing your trading budget over time. The more experience you have trading online, the better. Start with a few positions and grow your trading budget as your winning trade ratio increases. Employ sound trading tactics and strategies in pursuit of success. Read more. Learn from your mistakes.
We strongly recommend using our complimentary demo account to practice your newfound knowledge under real-world trading conditions. This is the single best way to achieve greater levels of success when trading online.
Regardless of your trading goals and trading style, one thing is for certain: you should never invest more than you are prepared to lose. As a newcomer to the scene, always set a specific budget for trading. As your experience grows, and your success rate improves, you can always increase your budget over time.
Your trading budget should be separate from your savings budget – the two should coexist without being detrimental to one another. Determine how much you have available for trading, without affecting your savings and retirement plans.
Leverage the Power of Your Trading Budget
AvaTrade Australia opens up a world of trading opportunities for you. More than that, we also provide you with leverage to boost the trading power of your funds. Leverage is one of the most powerful resources available to retail traders today. You can effectively open positions substantially larger than your capital allows, by dint of leveraged trading.
Let’s take a simple example to illustrate the power of leveraged trades. Assume leverage of 10:1. With AU$10,000 in your account, you can open a position up to AU$100,000. It’s easy to see exactly how leveraged trading can work to your advantage when you’re trying to profit off small price movements in currency pairs, stocks, commodities, indices, or even crypto assets.
Remember that leverage increases your exposure in the markets, but it also allows you to diversify your capital across different financial instruments, to mitigate overall risk. A caveat is in order; leverage works wonderfully when trades are moving in your favour. However, it can negatively affect your capital when trades turn against you.
Margin is another term you will come across when you use leverage. The margin requirement is expressed as a percentage of the total trade amount you will be opening. If there is a 10% margin requirement, this means you need to put down 10% of the trade amount from your capital. The rest will be provided by the broker. This is a fascinating subject, and if you’re interested in learning more, we strongly recommend reading our in-depth articles and guides about leverage and margin trading.
Want another example? Let’s take a look at a trader who is interested in Apple Inc shares. Let us assume leverage of 10:1. This means that the margin requirement is 10%. At today’s prices, Apple Inc (NASDAQ: AAPL) is trading around $125 per share (June 2021). 10% of that is $12.50 – the rest is covered by leverage. If you buy 100 shares of AAPL, the cost would be 10% ($125 X 100) = $1250. Note that this would be impossible if you were using all of your available capital of $10,000 to trade with. That still leaves you with thousands of dollars which can be allocated across different financial instruments to diversify your portfolio.
If your trade results in a profit of $5 per share, the positive difference is 100 shares X $5 = $500. There are costs to using leverage, but the profit potential is clear. Had you traded without leverage, your returns would be significantly less, because you would have to use your limited resources with less buying power. Leverage magnifies your profits and/or losses.
This introductory expose into leverage and margin is certainly exciting. However, you will derive much more benefit from it by seeing how it works in practical terms. We encourage you to open a demo trading account, use leverage and understand how it affects your return on investment accordingly. Position size is an important consideration. Feel free to read our trading for beginners guide to learn the basics of trading tactics, strategies, and budgeting.
AvaTrade Australia offers you generous leverage on some 250+ financial instruments. Naturally, leverage will vary from one instrument to the next, and is subject to regulatory restrictions.
Online Trading FAQs
- What is the minimum investment amount for online trading at AvaTrade Australia?
Here at AvaTrade Australia, you can register an account and deposit a minimum of $100 to get started. Be advised that this low amount will likely not yield much benefit to you if you’re looking to build a successful trading operation. However, we start small so that you can gradually build on your experience and become a more skilled trader. You can easily use our safe and secure deposit options to add capital to your trading account. With more capital in your account, you can open bigger positions and potentially profit from them.
- How should I increase my trading budget?
Once you register at AvaTrade, you are free to deposit funds into your online trading account at your leisure. We encourage you to do this responsibly. Rather than making big deposits which may adversely affect your savings, and your ability to pay your bills, make small deposits on a more frequent basis. That way, you will be able to build up your trading budget over time. It’s a gradual process, much like the acquisition of your trading knowledge. Another powerful resource in your toolkit is leverage. With leverage, you can magnify the size of your trades and potentially boost your profits too.
- What’s the right trading budget for my personal needs?
The answer is in the question! Your trading style and trading goals determine your trading budget. If you prefer day trading, you can open many small positions with a smaller budget. If you prefer swing trading which requires holding a position open for weeks, or months, you will need a bigger budget to open more trades since you are rolling over less money on a daily basis. If you’re single, you have more funds available for trading. If you’re married, your priorities are your family, and your trading funds may be restricted. It depends on your personal finances, and objectives.