You probably feel like a tiny fish in an ocean when you’re trading with a small account.
Because the profits you make seem so insignificant that you wonder if it’s worth your time and effort.
But here’s the good news…
In today’s post, you’ll discover 5 practical trading tips to help you grow your small trading account into 6-figures, or more.
The best part?
You’ll learn how to do it steadily so you don’t blow up another trading account—even if you have done it the last 5 times.
So let’s get started…
How to exploit the 9th wonder of the world and massively increase the size of your trading account
As you know, compound interest is the 8th wonder of the world.
Here’s how it works…
Let’s say you have a $1,000 trading account and you earn an average return of 20% a year.
After 30 years, your trading account would be worth…
But, what if you add an extra $1,000 to your trading account each year, what difference would it make?
So, let’s do the math again…
Let’s say you have a $1,000 account, you earn an average of 20% a year, and you add another $1,000 to your account every year.
After 30 years, your account would be worth…
Can you see how powerful this is?
Yes, compound interest works great. But, if you want to put it on steroids, then you must regularly add funds to your trading account—that’s how the big money is made!
Why looking at your profits causes you to remain a loser
Here’s the thing:
Most of us get involved with trading because we want to make money.
However, when you have a small trading account, focusing on your profits will hurt your trading performance.
Let’s say you have a $500 account and you made a profit of $20 on a trade.
Then you’ll think to yourself:
“I invested so much time in trading just for a measly $20?!”
“I need to make more money to justify the effort I put into trading.”
So, you ignore risk management and place larger trades. You might get lucky and double the size of your account.
Eventually… lady luck runs out and you wipe out your entire trading account.
So here’s the lesson:
Don’t focus on the size of your profits because with a small trading account, your profit & loss will also be smaller.
Instead, look at it in terms of R (a concept I learned from Dr. Van Tharp).
This refers to your gain/loss relative to the risk you took on a trade.
- If you risk $10 on a trade and made back $50, that’s +5R (50/10)
- If you risk $1,000 on a trade and made $500, that’s +0.5R (500/1000)
- If you risk $200 on a trade and lost $300, that’s -1.5R (300/200)
So by focusing on your R multiple, you’ll have an objective view of your trading performance—and not get swayed but your “tiny” profits.
The secret to trading a 7-figure trading account (it’s not what you think)
Let me share a story with you:
I’ve been lifting weights since I was 20. And when you’re young, all you cared about was lifting heavier regardless of your form.
Eventually, I paid the price.
My poor form and heavy lifting got me an injured back.
Now, I knew that if I wanted to continue lifting, I need to re-learn how to lift weights—so I got a coach to help me with it.
And do you know what’s the first thing we did?
We stripped off all the weights and just focus on lifting an empty bar (no ego, no pride, nothing).
Then he taught me the process of how to do a proper squat:
- Approach the bar
- Keep your shoulders tight
- Lift the bar and take 2 steps back
- Keep your back straight and feet pointed out (about 45 degrees)
- Take a deep breath
- Squat and maintain posture
- Use your glutes and drive up to a standing position
Once I mastered the process, then we added weights to keep gaining strength.
And guess what?
Whether you’re lifting an empty bar or 100kg, the process of doing a proper squat is the same!
Now, why am I sharing this with you?
Because it’s the same for trading!
Whether you’re trading a $500 account or $1m account, the process is the same (the only difference is the number of zeros behind your trading account).
If you want to learn more what the trading process entails, then go read How To Be A Profitable Trader (Within The Next 180 Days).
Not all brokers are created equal. Here’s what you must look for when trading a small account…
Here’s the deal:
Whether you’re trading a $100 or a $1m account, one thing is constant—your risk management.
This means you want to keep your risk per trade to not more than 1% of your account.
- On a $100 account, your loss on a trade shouldn’t exceed $1.
- On a $10,000 account, your loss on a trade shouldn’t exceed $100.
- On a $1m account, your loss on a trade shouldn’t exceed $10,000.
Now if you have a $10,000 account (or more), then most forex brokers can meet your risk management needs.
But on a $100 account, you have further constraints because your loss cannot exceed $1.
Let’s say you trade 1 micro lot with a stop loss of 50 pips.
If you do the math, that’s a potential loss 5% to your account—not good.
You must find a Forex broker that lets you trade nano lots (which are even smaller than micro lots).
These brokers are market makers and they will allow you to practice risk management even on a small trading account.
How to profit from your mistakes without paying expensive “tuition fees”
When you trade with a large account, your “tuition fees” to the markets will be costlier.
If you risk 1% on a $1m account, then your potential loss on the trade is $10,000.
So if you make a mistake, that would cost you $10,000.
On the other hand:
If you risk 1% on a $1000 account, then your potential loss is $10 which is a much lower “tuition fee”.
So, don’t fret if you have a small trading account because this is a great time to learn from your mistakes—while they are still “cheap”.
So now the question is…
How can you learn and even profit from your mistakes?
- Journal down at least 100 trades (whether it’s trading breakout, pullback, etc.)
- Identify the setups that make you money and focus on trading these setups
- Identify the setups that cost you money and avoid these setups
And the best part is:
It won’t cost you much to find out which your money-making setups are and which to avoid at all cost.
So here’s what you’ve learned:
- If you want to grow your small account into 6 or 7-figures, then you must regularly add funds to it
- Don’t be obsessed with your profits because it will make you depressed. Instead, focus on increasing your R-multiple
- The process of trading a small account is similar to a large account. So focus on the process, not the money (which comes later)
- Your trading mistakes will be “cheaper” on a small account. So learn and profit from it
- You must find the right broker which allows you to practice risk management even on a small trading account
Now here’s what I’d like to know…
How do you intend to grow your small trading account?
Leave a comment below and share your thoughts with me.