I firmly believe that an underfunded account will soon be a blown account. No army attempts to go to war with 1 bullet and expect to win the war. The minimum deposit is a donation to the broker, that’s why they offer $20, $10, and even $5 minimum deposits.
The broker can easily cover the other side of your trade and wait for drawdown to trigger a margin call or volatility to hit your stop loss to close your trade at a loss. For them it’s easy money and the minimum deposit is low enough that underfunded traders will deposit the minimum repeatedly and continue the cycle of blown accounts.
In Smart Money Concepts they talk about inducement to get retail traders to enter the market, but they don’t talk about the inducement of minimum deposit offers from brokers that induces underfunded traders to continue making repeated small deposits. The broker knows those small deposits add up and offer little to no defense against a margin call when over leveraged.
This is my rule of thumb for a trading account balance:
1,000 TIMES THE $ VALUE OF 1 PIP BASED ON LOT SIZE THAT YOU TRADE.
For example, if you trade these lot sizes you should have at least these balances:
.01 micro lot = $0.10 per pip × 1,000 = $100 account
.1 mini lot = $1.00 per pip × 1,000 = $1,000 account
1 standard lot = $10.00 per pip × 1,000 = $10,000 account
This rule of thumb aligns with proper risk management when used with an ordinary stop loss. A 10 pip SL would be risking 1%. With a 20 pips SL you would be risking 2%.
1,000 times pip value is the minimum, if you can afford to go higher, such 2,000 to 10,000 times the pip value, it’s even better risk management.
bill.h
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