What is an Appropriate Account Size?
Recommending an appropriate account size is problematic for a number of reasons.
Firstly, the question falls into “personal” advice which I’m not licensed to give.
And secondly, not every trader is the same in regards to their;
- Risk appetite (drawdown),
- Financial position,
- Investment objectives,
- Preferred markets they trade,
- Preferred securities they trade (Futures vs CFDs vs Forex vs Shares vs Options etc) and the
- Margin requirement for their preferred markets and securities.
All these factors will impact the size of an individual’s trading account.
So for me to suggest an appropriate account size is difficult as one size, or suggestion, does not fit all.
However as a general guide line there are a number of common approaches traders usually follow when giving consideration to determining an appropriate account size;
- Capital Allocation
- Capital Preservation and
- Capital Funding
Let me explain each in turn, and as I do, I’ll assume we’re discussing futures trading.