Beginners looking to get into trading often wonder how much they should invest at first. The more you can put into your accounts, the better, especially when you’re just getting started. However, is it possible to start trading with as little as $1,000?
You can start trading with $1,000 in several markets. However, if you trade on the U.S. stock market, you’ll need at least $25,000 in your account to day trade. Due to this, many traders start with forex and fractional shares, then move to full shares and day trading after growing their account and skills.
However, if you don’t want to day trade, you can still invest in individual stocks. $1,000 offers a great starting point for investing, allowing you to learn and earn some money. Further in the article we will uncover some avenues you can explore when just getting started with investments and trading. So, without further ado, let’s get started.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
Why You Can Start Trading With $1,000?
You can begin trading on the market with any amount of money. Some investors start with a little as $100 or $500, so $1,000 can go a long way if you use it correctly! You don’t even have to put in your full $1,000 unless you feel ready.
It’s best to start building your portfolio slowly over time instead of all at once. You should also make sure to avoid incurring risk and hefty fees while diversifying your portfolio. Because of all these factors, it can take a while to learn the best ways to invest money.
One of the best markets for short-term trading with $1,000 or less is the forex market. Forex markets allow you to work on a small account while still having good buying power and leverage. But, that for sure is not the only market that offers such an opportunity. Continue reading as we unfold different options you may explore when getting started trading with a smaller account.
What Should You Trade With a Small Account?
You have many choices to browse through when determining what you want to trade and how. Many people choose fractional shares since they’re less expensive than buying a whole stock. However, what you do will depend on your situation and trading preferences.
It is also important to do proper research when selecting a broker, irrespective of the instrument you choose to trade. You want to ensure that you won’t spend all your gains on different fees and spreads!
Here are a few financial instruments that you have available to you when just getting starting with trading with $1,000 (or less):
Index Funds and ETFs
Let’s start with index funds and ETFs! According to Investopedia, index funds are financial instruments that follow a market index. They are available both as mutual funds and as ETFs. They offer good market exposure, are inexpensive, and track the index over the market.
Index funds allow you to invest a small amount of money and build your trading account. These funds are passive and will enable you to build a very diverse portfolio for $1,000.
It’s also a good place for a beginner to start since these assets come with a ton of information. You can learn everything very quickly about ETFs and index funds at a glance- it’s all readily available for you. A simple google search exposes you to a repository of information on these instruments.
To trade index funds, you want to take a passive approach. These assets tend to do best in retirement accounts, where people hold onto them for long periods. They earn you returns based on their index performance. With $1,000, you can add a few to your account to hedge risks.
You can also open a forex trading account. However, you need to make sure that you assess the risks associated with every trade. The forex market should act as a way for you to diversify your investment, not as a place into which you put all your money.
The market relies on international currency rates. You can make small exchanges to gain a more extensive account over time slowly. Many people who invest in this market start very small. As you gain experience, you can move on to making larger trades.
You can practice day trading with forex through many different online brokers. You’ll want to try out different strategies in their demos and find one that works for you. I recommend that you try first working with one currency pair before adding more.
Trading only between two currencies at first allows you more time to analyze the market and grow familiar with it. You’ll want to know about buy and sell positions as well:
- Buy Position: You think the base currency price will rise above the quoted currency.
- Sell Position: You believe the base currency price will drop below the quoted currency.
For example, if you expect the euro to cost more than the American dollar, you’d enter a buy position. In this example, the euro is bullish, and the dollar is bearish. The opposite would be best for entering a sell position.
As the name suggests, fractional shares are parts or fractions of a whole share, allowing you to trade them at lower price points than the whole share would command. If you aren’t starting with a large account, fractional shares are a great way to work up to whole shares. You can also buy multiple fractional shares over time, eventually forming a full stock!
Fractional shares are great for most people. You get to choose how much of a share you buy based on the amount of money you can put into it. You can buy in various parts, making how much you purchase unique to your account.
For sake of their simplicity, many professional day traders work with fractional shares, so this might be a good option to consider for you if you’re interested in day trading. Your main goal should be to gather many gains slowly. From there, you can reinvest the profits or cash them out.
Options are a bit risky, but you can still trade them for just $1,000. Trading options is a bit more complicated since you add in strike prices and expiration dates. However, it only takes a few steps to trade them. Plus, with options, you work with 100 shares at once – and get better prices than if you were to purchase the stock outright.
This chart explains when to buy and sell certain types of options:
|Expected Stock Movement
|Stock will go up
|Stock will stay the same
|Stock will go down
There are advanced strategies that you can use when it comes to trading options. This short YouTube video explains the basics in more detail:
Earning Expectations With $1,000
If you’re starting out with $1,000, you should also have reasonable expectations on how much you can earn from it. You can’t start off thinking $1,000 is enough to make you rich quickly – it won’t work that way, and you’ll only be disappointed.
You should, instead, focus on gaining experience in your market of choice and making reliable trades at this stage. As you grow and learn, you can seek out higher gains.
$1,000 won’t turn into a fortune right away – you’ll need to put in the time and effort to become a successful trader.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
- Best Trading Courses You Can Take For Free (or at extremely low cost): I reviewed 30+ trading courses to recommend you the best resource, and found Trading Strategies in Emerging Markets Specialization on Coursera to beat every other course on the market. Plus, if you complete this course within 7 days, it will cost you nothing and will be absolutely free! Click Here To Sign Up Today! (If you don’t find this course valuable, you can cancel anytime within the 7 days trial period and pay nothing.)
- Best Passive Investment Platform For Exponential (Potentially) Returns: By enabling passive investments into a Bitcoin ETF, Acorns gives you the best opportunity to make exponential returns on your passive investments. Plus, Acorns is currently offering a $15 bonus for simply singing up to their platform – so that is one opportunity you don’t want to miss! (assuming you are interested in this platform). Click Here To Get $15 Bonus By Signing Up For Acorns Today! (It will take you less than 5 mins to sign up, and it is totally worth it.)
You can start trading with $1,000 or less quickly – this is definitely not too little money to start with. However, along with the instrument you choose to trade, you will also need to conduct research on choosing a broker that’s right for you. From there, you should work on developing your trading strategies.
It’s important to realize that you don’t need to have a massive fortune to succeed in the stock market. Several smaller wins can add up to give you substantial gains, which you can then reinvest into your accounts. Many professional traders start small and move on to making larger trades and profits over time.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
Affiliate Disclosure: We participate in several affiliate programs and may be compensated if you make a purchase using our referral link, at no additional cost to you. You can, however, trust the integrity of our recommendation. Affiliate programs exist even for products that we are not recommending. We only choose to recommend you the products that we actually believe in.