Have you been looking at trading, but wondering how much do I need to start forex trading in South Africa? If the answer is yes, then this article is for you. Though you don’t need much money at all to get started, investing properly in yourself will make your job a lot easier – returns are always relative to the size of your investment and if you want to get serious about trading, you need to make a serious investment. Trading a small balance will encourage you to take unnecessary risks and will lead to nothing but blown accounts and money down the drain.
Minimum deposits are great to train with, but that’s about it
Forex is incredibly accessible when compared to the stock market, with much lower fees and minimum deposits.
Most South African forex brokers will allow you to open an account with just 1000 RAND or $100 USD which is great, but these minimums are just designed so you can get the feel for forex trading on a live account – if you think you are going to make even a part-time salary trading a 1000 RAND account, you’re kidding yourself.
Minimum deposits are so you can learn the ropes, make the minimum deposit, learn the ropes, gain some confidence and then be prepared to invest in yourself.
So how much do you need to invest to start trading forex professionally in South Africa?
Well, let’s look at some numbers. The median salary in South Africa is just shy of 500K Rand or about 35K USD. That works out to around 42K Rand per month.
Now let’s assume you’re a great trader and can generate a 10% return every month. In order to generate a monthly salary of 42K Rand from your trading, you’re going to need to be trading a balance of 420K Rand.
If you’re only generating 5% per month, you’re going to need twice that much. It’s also important to consider down months, you need to be able to survive these too, so the more money you have in your trading war chest, the better.
I don’t have enough money to trade professionally yet, how much do I need to start trading forex part-time?
Don’t worry, you’re definitely not alone and recognising this early on in your trading career may have just saved you a lot of pain.
So how much do you need to start trading forex in South Africa part-time?
The barriers to trading part-time are much lower as you’re not trying to replace your existing salary through forex trading, having said that, you still need to invest enough to make the extra hours you’re going to be putting in after work each evening worth it.
How much you need to invest is going to come down to your personal circumstances and how much extra you want to make.
Let’s assume, like most people, you earn a bit less than the median salary, say 400K Rand per year or 33K per month and you want to earn a bit more like your neighbours on the median do.
Well in order to keep up with the Jones’, you’re going to need an extra 100K Rand per year or 8.3K per month.
If you can generate 10% per month trading forex, then you’re going to need a balance of 85K in your forex trading account, or if you can only make 5% per month, you’re going to need about 170K in your trading account.
These numbers will vary a lot depending on your means and financial goals but are obviously much more achievable for your average South African.
Trading forex part-time is the logical place to start if your end goal is trading forex professionally.
There’s also this to consider …
The power of compounding returns
In all of our above calculations, we just used simple percentage gains and assumed you would be withdrawing your profits each month, but the true power of trading lies in compounding those returns.
Let’s continue to work with our previous example of someone on a bit less than the median salary, but assume they can afford to not withdraw their profits every month as they are still employed.
In the previous example, our trader started with 85K and made 100K profit in the year, withdrawing 8.3K Rand each month, but what would have happened if they’d compounded those returns over the year?
The formula for this is pretty simple but you’ll need a scientific calculator:
85000 x 1.1^12 = 266 766 Rand
That’s 81K more profit for the year than the trader who withdrew their profits every month – no change to the trading strategy, just a longer-term investment in yourself.
Let’s run the numbers again for another year:
266 766 x 1.1^12 = 837 225 Rand
Double-check the maths for yourself – If you start out trading part-time with a serious, yet relatively modest trading balance of 85K, within 2 years you could have more than enough trading capital to start trading forex professionally.
It’s time to get serious about your forex trading
How much you need to start trading forex in South Africa is going to come down to your personal financial goals, but whatever your goals, you need to be serious about achieving them.
If you’ve been trading small accounts and making profits but not making enough money, or even perhaps losing money because you couldn’t really afford to trade the size you wanted, it’s time to get serious about your forex trading.
Make a serious investment in your trading account and yourself and it will pay off.
Trading requires a lot of dedication and energy, no matter how small your balance is, so you may as well make that time and effort worth your while.