How much money do you need to trade stocks

Jason BondJason Bond ·

Trading stocks is an endeavor that many have looked to. However, a lot of people ask me, “How much money do you need to trade stocks?” Well, the answer is it depends. You could open a small account and still be successful like Kyle Dennis, who turned $15K into nearly $4M in just a few years. Now, trading isn’t easy. It takes time, dedication and grit. However, don’t be scared to trade because you don’t know how much money you need to trade stocks, yet. You could trade with a small amount, but you’ll need to continuously look for ways to improve your stock trading, as well as find the right broker. Moreover, you need to understand that there are different types of trading. Depending on your trading goals, you may need to maintain a higher amount of capital.

How much money do you need to trade stocks

Again, the amount of money you need to trade stocks depends on your trading style. For example, if you want to swing trade, you could start with the bare minimum account, depending on which broker you select, it could be a few hundred dollars. However, you should keep in mind that it’s highly difficult to just trade with a few hundred dollars due to trading commissions and other fees. That said, you may want to save up and start to trade stocks with a few thousand dollars, which should help to take some pressure off of your trading and could give you a better chance at being successful in trading. As always, you should only trade with money you could afford to lose.

Trading stocks with a small account

Moving on, you could trade low-dollar stocks if you have a small account. For example, if you could afford to put $5K into a trading account, you might not want to trade high-dollar stocks. You could get stopped out due to large price swings, if you’re trading stocks over, say, $50. In turn, if you get stopped out, these losses could take a big cunk out of your capital. On the other hand, when you trade stocks under $5, you’re able to position size better and have more shares, and potentially profit from large moves.

Remember, the SEC defines penny stocks as those trading under $5. However, that doesn’t mean these are shady companies. Many companies have emerged as successful stocks, even though they were once penny stocks. Despite all the negative connotation with penny stocks, you don’t need a lot of money to trade these stocks.

There are many traders that have found success with penny stocks (those trading under $5 and listed on national exchanges like NYSE and Nasdaq). For example, Jason Bond is a penny stock guru and has figured out a way to potentially profit from large penny stock moves.

how much money do you need to trade stocks

Day Trading Requires “a lot” of Capital

On the other hand, if you want to trade everyday, you can’t just deposit the minimum. According to the U.S. Securities and Exchange Commission (SEC) and FINRA, “FINRA rules define a “pattern day trader” as any customer who executes four or more “day trades” within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades in the margin account for that same five business day period.”

If you’re a pattern day trader, you must have at least $25,000 in your account and could only trade in margin accounts due to FINRA rules. That said, many consider this as a lot of capital. That in mind, day trading is primarily for those who have a lot of time to dedicate to learning about trading. If you want to start trade stocks for a living, this is what you’ll need to do. However, you shouldn’t put in the bare minimums because you will most likely have losses when you’re first starting out, and your account minimum could fall below $25,000. Thereafter, you would get flagged if you still execute four or more day trades within five business days and potentially risk getting your account frozen for some time.

The Bottomline

Depending on your trading goals, you may need only a little bit of capital to trade stocks. For example, if you’re looking to passively trade stocks, you could start with a small account of say $5K to $10K. However, if you’re serious about trading and want to make it your career, you’ll need at least $25K.


Jason Bond runs and is a swing trader of small-cap stocks.

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