How to Trade with a Small Account

It is a common question many traders ask. A lot of traders, especially beginner traders, are faced with the prospect of managing small accounts. For some, this is a big task that requires tact and discretion. The fact is that regular traders with large accounts may have an edge over beginner traders who only have a small trading account to work with.

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Although the concept of a small account is subjective, dependent on the amount of money you have, but if you have one million dollars in the bank, an account size of $10,000 is a small potatoes compared to a person trading with a sum total of $10,000 in the bank.

Success is not determined by account size

The success of your trading is not dependent on the size of your trading account so don’t let anyone tell you you cannot trade and be successful with the amount of money you have.

Honestly, no amount of money is too small to trade with unless you don’t have enough to cover initial buys and cover fees, in which case, you’ve probably got bigger problems than trading. That being said, the goal of trading is to make money and grow your wealth, which is not dependent on the amount of money you begin with. Do you see the difference?

Sometimes people have traded with huge sums of money, and somewhere down the line, they lose all the money. There have been other instances where people start up with mall accounts and have consistently grown the money so much that their accounts are unrecognizable when compared to how they stared.

So, how do you make money trading with a small account?

Treat small accounts like big ones

The simple way to begin is to think of your small account as a big one. As a beginner or an owner of a small account, you must treat your small account as if it is a big account. If you treat your account properly, you will make money over time. You treat it is a big account in terms of the energy you put in and the level of risk you are willing to take.

The 2% Myth

What most people advise is that you risk one or two percent of your account on any one trade. It makes perfect sense if you look to grow slowly and if you are still a beginner trader. When you are still trying to find your best strategy, your risk management strategy, what type of trader you are, and what kind of market you will trade.

If you are a beginner trader, it makes little sense for you to risk too much, as this can lead to a short-lived trading career. As a beginner, it makes perfect sense to trade small and to risk just a minor percentage of your account.

But two percent won’t always work
However, if you have proven your strategy, and you have learned how to make money, one or two percent will not bring you success. Sincerely, it is not worth the risk if you are trading just one or two percent. Trading at that rate will not lead to growth in your account. If anything, it will adversely affect your account because the trade fees alone would kill any potential profit.

Let’s do the math. Assuming you risk two percent of your trade on each trade and find success five out of ten times; you may discover that at this rate, it’s not worth the time to sign in.

To trade effectively and profitably, you can’t just “get by” with trading. You have to show a little more gumption and be assertive without being irresponsible.

For example, let’s say you have $1,000 and you risk two percent with a success rate of 50% monthly. By the end of a month, you’ll only make an extra $100. If you continue at his rate for 12 months, your profit may only be $1,000.

It is worth it?

Take bigger risks

At some point, you have to take more significant risks. If you want to grow your small account into a bigger one, factor in your risk-to-reward ratio and your due diligence for smart investment choices. Don’t just jump on the trending token. That’s the marketers and shillers who are trying to influence your decisions.

There is balance to be found and only you can determine where that balance is, but drastic moves from a two percent to ten percent risk on trades might not be a great idea either.

History, analysis, trends, news, developer reports… Those all play a part in determining where you want to take bigger risk with your money. Market conditions definitely play a role. So does volume and market capitalization.

Once you start making money, then you can consider leveraging those gains to increase the size of your portfolio. Be smart about it and your small account will eventually turn into a big account.

Bottom line

Let’s recap.

Small accounts are not the measure of a successful trader. Consistent gains are.
Your account will grow if you take trading seriously, do your research, and risk a proportional amount of your liquid assets that will garner profit if you have a good trade, but won’t wipe you out if you lose on a bad one.

Good trading takes time. You can take bigger risks when it’s prudent, but don’t rush it. Nurture the small account and help it grow. Good luck and trade well.





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