Reader Question: Why start with £1000?

Okay, it’s not a question that has been asked here yet, but a similar question was asked on a previous Trading Trail blog that I ran, and it is representative of the kind of question that I invite you to ask here. If you post comments on these articles, you will get answers, either as counter-comments or as future articles.

So here is the question I’m asking myself on your behalf…

Why did I start with £1000?

I began this real-life trading diary (don’t forget to read the publisher’s disclaimer) with a starting fund of £1000, and you might wonder why I chose that particular amount. Here are my reasons:

A nice round figure

£1000 is a nice round figure, don’t you think, and it makes it easy to calculate percentage increases and decreases along the way. £100 would also have been a nice round figure, but too low to give me any chance of staying in the game. £10,000 is a nice round figure, but too much of my own money to put on the line in full public view.

A common starting amount

I have no figures to prove it, but I reckon that most first-time spread bettors will deposit £1000 with a spread betting company initially. Most people can withstand that kind of a loss, and let’s face it, you’re not going to start with an arbitrary figure like £763.29 are you?

A little can go a long way

Some readers will think I’m being cheap, but remember that a £1000 deposit can potentially be leveraged up to something like £5000, and remember that you’re potentially ‘on the hook’ for the higher amount.

Contrary to popular belief, you don’t need a lot of money in order to make a lot of money. I’d like to multi-bag this money like I did during a similar experiment in 2009. So we’ll leave the alternative task of making a small 5% return on a bigger £100,000 cash pot to the ‘investors’!

A small loss is better than a big loss

Most newbie spread bettors lose money… and fast! Some very successful traders have made good money for years, and then blown up! The markets can be very humbling, as they were for me in 2010.

I’m happy enough losing £1000 in pursuit of a £30,000 (for example) multi-bagging profit, but I wouldn’t be so content with the prospect of losing £10,000 or more in full public view even in pursuit of a greedy £300,000 profit. Nor would you, especially if it was your last £10,000!

Summary

So there you have it. I started with £1000 because it’s a nice round figure that should keep me in the game, it’s representative of the amount that most people would start with, and I aim to make a lot of money or lose only a little money.

If you’d like to pose any similar questions in relation to my public trading run, go right ahead by posting comments.

Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.