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One question that I get a lot is “how much money do I need to trade for a living.” My answer comes from a cliché about the futures market. It goes: “The easiest way to make a small fortune in the futures market is to start with a large one”. What does this mean and what does it have to do with a new trader? Well, aside from maybe not starting out by trading futures, I believe it says that you can never start with enough trading capital. New traders do themselves a huge disservice by trying to make money in stocks while being underfunded. What’s the definition of being underfunded? My answer is for those trying to swing trade using a retail online broker. Anything less than 5K is going to make it difficult for you to learn and make money. Now if your focus is learning and trading small then you can start with 3 or 4 K, but don’t expect to make any money. Until you establish some consistency in your trading performance, you’re going to bleed cash on most trades. If you want to day trade, SEC rules state you need at least 25K, but if you’re just starting out, I would shoot for 100k. The reasons are the same as in swing trading. You need time to learn and in the beginning you lose. You are also trading more often, so this compounds the losing. It also allows you to eventually trade with some size without having to go on margin. I remember when I first took a stab at day trading.. All I could think about was how much I was going to make. Making money was the single focus of both my failed attempts. I never really thought about the learning curve in day trading or risk management. I was too under capitalized for trying to learn to day trade and make income. And I wasn’t willing to give up trying to make income and just learn. Combine that with trading on margin and it didn’t take long for me to wash out. The good news for new traders is you can start trading with very little capital, but you need to focus on trading small and learning.

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