Volatility 75 Index or VIX 75 is one of the few trading pairs that you can’t stop trading once you get a hold of it.
Being a highly volatile index, there are misconceptions regarding the capital required to trade the volatility 75 index. If you’re considering to trade the volatility 75 index, this article is for you.
We’ll discuss the minimum amount required to trade the volatility 75 index.
So, how much minimum equity do you need to start trading the volatility 75 index?
When considering entry into the VIX 75 market, you should remember that it’s not about a fixed amount. Several factors dictate how much you need to start. Let’s delve deeper.
Read my article on how to trade the VIX 75 successfully.
Firstly, the broker you choose (helpful tips on choosing a broker) plays a pivotal role. Different brokers have varying margin requirements. Margin, in this context, refers to the minimum amount of equity you need in your account to initiate a trade.
Some brokers might offer access to VIX 75 for as low as $100, while others might set the bar higher, requiring $500 or more. It’s essential to do your due diligence and pick a broker that not only has favorable margin requirements but also boasts a good track record and robust trading platform.
However, don’t be swayed solely by low margin requirements. It’s tempting to dive in with the least amount possible, thinking it reduces your risk. In reality, a too-small account size can quickly get wiped out due to the extreme volatility of the VIX 75. This is where the concept of risk management comes into play.
Risk management is an integral part of trading, especially in highly volatile markets like the VIX 75. Before you even place a trade, you should determine how much of your capital you’re willing to risk. A common rule many traders abide by is the 1% rule. That is, never risking more than 1% of your total trading capital on a single trade. So, if you start with an account size of $1000, you shouldn’t risk more than $10 on a single VIX 75 trade.
Given the high volatility of VIX 75, you might find that such conservative risk management requires a bigger account size.
So, while a broker might let you start with $100, trading responsibly might necessitate starting with $500 or $1000 to ensure you don’t blow your account on a few bad trades.
Moreover, the leverage offered by your broker also impacts how much you should start with. Leverage allows you to control a larger position with a smaller amount of money. While this can amplify profits, it can equally magnify losses.
If you’re new to the world of VIX 75 or trading in general, starting with lower leverage or even trading without it is advisable.
As you gain experience and become more comfortable with the market, you can consider utilizing higher leverage.
In a nutshell, the amount of equity you need to start trading the Volatility 75 Index largely hinges on your broker’s requirements, your risk management strategies, and the leverage you’re comfortable with.
While you can technically start trading the volatility 75 index with a small amount like $100 with certain brokers, it’s wiser to start with a more significant equity, such as $500 or $1000, allowing you a cushion for inevitable market fluctuations.
