Choosing Your Account Size
This will be entirely personal to you. You know your financial position. The usual advice is: Never open an account with money you cannot afford to lose without altering your lifestyle. It is pretty good advice, and this time, I am going with the crowd (although it does hurt!).
But then, you have another decision. Let’s say you have sat down and worked out your net liquid assets (not including houses, antiques, art, or other illiquid assets). That should include bank accounts, any loans due to you, gold, and direct share and fixed interest investments.
Then, you can evaluate what portion of this figure to place at risk (of course, all your investments are at some risk!). For beginners, I would suggest taking it easy at first with a small account of anywhere from £500 to £5,000. You can always create a larger account once you have gained some expertise. Perhaps your goal is to live off your trading. It can be done, but expect a learning curve which could take months and years.
Choosing The Markets To Trade
This will not be too difficult, since I have chosen them for you! I suggest when you start, you restrict yourself to the main indices and a few other very liquid markets:
- The Dow Jones, the emini S&P 500, the FTSE
- Gold (and occasionally Crude Oil)
- The currency pairs: Euro/US Dollar, and British Pound/US Dollar
- Blue Chip Stocks like those shares in the FTSE 100
There is really no need to go looking for the most exotic markets out there. My belief is that if you keep things simple, you have a greater chance of success than if you over-complicate things. After all, if you make money trading only the Dow, will it really matter to you if you didn’t trade the Eritrean Nakfa (yes, it does exist)? Most of the time, the Dow and the FTSE will offer you enough action in stocks to be getting on with. Often, the euro (which is currently centre-stage in the news) offers great opportunities, and it is a very liquid market.
Of course, when you gain more experience, by all means trade more exotic markets, if your research tells you a trade there would offer profit potential. Just follow your usual guidelines (to be discovered in late chapters) and have fun.