How much capital you have to work with is a function of a number of factors and is the first major decision you have to make when you start investing.
The low end of the spectrum is, of course, defined by the minimum amount to required to establish a trading account somewhere (this value varies depending on exactly where you choose to open your account), and the top-end is defined by the sum total of the assets you have to work with.
In some cases, when you’re just starting out, you may have little choice but to hover at or near the minimum amount required to open the account initially if resources are tight, but for obvious reasons, that’s no more optimal than throwing every dime you have into investing.
Whatever your precise number is (and it’s different for everyone), it’s governed in part by the following additional factors, including:
• What is motivating you to start trading in the first place (your overarching goals and objectives)
• Your desire to make a profit
• Your willingness to risk capital (and what percentage of your net worth you’re willing to risk)
• Your age
• The size of your family and the ages of your family members
• Your current occupation
• And how much time you have to devote to trading
Note that this is hardly an exhaustive list. Every person is different, and the exact size of your starting capital stock may be influenced by a number of other factors not listed here. There are no “right” answers where this is concerned. In the end it comes down to what you can afford and what you’re comfortable with.
Identifying the motivating factor that explains why you’re trading is trickier than most people realize, and in truth, a fair percentage of novice traders don’t spend a lot of time contemplating it, but it matters more than you might think.
Note that “I want to make money,” isn’t really a motivating factor. There are, after all, any number of ways of making money, so if that’s the first answer you arrive at, dig deeper to see what lies beneath it.
For instance, some people ultimately decide they want to start trading for the thrill, rush and excitement of it. For them, profits are secondary. Sure, making consistent profits is the means by which you can continue trading, and thus, continue feeling that rush, but for people motivated by the excitement, the profits aren’t really the primary consideration.
Contrast that with the person who has a deep desire to make a living via trading, and you begin to see how and why your underlying motivation will invariably shade and color your trading strategy.