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In today’s episode, you’ll discover the easiest way to grow a small trading account.
So tune in right now…
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How Much Money Can You Make from Forex Trading?
Transcript
Hey, hey, what’s up a friend? In today’s episode, I want to share the easiest way to grow a small trading account.
This is the easiest way to grow your small account
The easiest way is to risk 100% of your trading account. If you have $1,000 trading account, you bet $1,000 on each trade, because if you achieve a 1:1 risk-reward ratio on your trade, then you’ve just doubled the size of your trading account.
Just like that, it’s easy and fast. But… there’s always a but isn’t it? What’s the downside?
Well, is this approach feasible? Yes, you can double your trading account with one trade in half a day. But is this something that you can do consistently over the next 10, 20, 30 years?
The answer is no. Because it’s a matter of time before you hit a series of losing trades, and you’ll lose everything and more.
So growing a small trading account quickly and easily can be done, but whether is it feasible is a different story. This is something that every trader must consider.
I’ve read comments on some of my YouTube videos where people say, forex is boring on a $500 account because it takes forever to grow that account. Whereas, if you trade some penny stocks, then that $500 turns into $3,000 or $4,000 in a few days.
Yes, that’s possible in the forex market as well. But again, is this something that you can be doing for the next 10, 20 or 30 years? That’s a question you have to ask yourself because I don’t know what’s your goal in trading.
Some of you might be doing it for the excitement or you might be trying to see how fast you can turn that account around to make triple-digit returns.
But some of you are more serious about this and you want this to be something that can last for the next few decades.
And if you’re looking at trading as something that will last a few decades, then you have to consider the feasibility aspect because you can’t be betting the farm on every trade.
Now, what’s the solution to growing a small trading account without blowing it up? There are a few things to bear in mind.
1. Manage your risk
You can’t be betting 50% or 100% of your account on each trade because it’s a matter of time before you lose it all. You have to dial down your risk to be risking no more than 1% of your account on each trade.
And now some of you might be thinking, “But Rayner, 1% of my account on each trade means that with a 1:2 risk-reward ratio, that’s only a 2% gain.” Yes, I know a 2% gain might sound very little. But it’s, it’s all about perspective. And I’ll talk more about that later on.
I agree that 2% may not seem a lot but when you compound that little tiny bit of return, it can snowball into something big in the future. And that’s why I said, it depends on what you are looking for in trading.
Are you looking for something new, fast and crazy or something slow and steady, for longevity? Are you looking for a one night stand or a marriage? That’s my question to you, and you get my point.
So number 1, you go to manage your risk, forget about the excitement the doubling or tripling of your account within a few days, forget all of that stuff.
Because if you want this for the long term, if you want a lady, a wife that you want to marry for the long term, you got to take it slow and steady. You don’t marry someone on the first day. That’s the first thing risk management.
2. Add funds regularly to your trading account
Let’s bring back the $1,000 trading account example. Now, some of you might think $1,000 is not even a small account. It might be a huge account, especially for those of you who might be in India, South Africa.
On the other hand, some of you from the United States or Singapore might think $1,000 is a small account. I’m just going to keep things simple and use $1,000 as an example, it could be big or small to you.
So if you have a $1,000 trading account, and let’s say you compound your return for 20 years, and each year, you make an average of 20%. Then at the end of 20 years that $1,000 account will be about $38,337.60.
Now, what if you have that same $1,000 account, but instead of just simply compounding it, you add $1,000 to your account every year? And again, it grows by an average of 20% a year and you compound it for 20 years. That account will be worth $262,363.20.
And that’s a lot more than the $38,000 that I just shared with you. And that’s all by regularly adding funds to your account. Can you see where I’m coming from?
If you want to grow a small account, yes, you can compound it. But if you want to put steroids into your compound effect, then you must add funds regularly to your account.
Next…
3. Think long term
You have to think far. Just look around you, if you want to be a doctor or maybe a neurosurgeon, you don’t become one simply after taking a weekend course or seminar. You probably have to study medicine for like 5 or 6 years.
You would go to the hospital to be an intern, you’d be a resident for a few years or do some apprenticeship, and then finally after 10, 15 years you become a neurosurgeon.
Or if you want to be a top salesperson in your company. You go through their training to learn their products for the first few years, after which you learn about human psychology and persuasion skills, then maybe after 5, 6 years, you become a really good salesperson.
No one gets good straight out of the door. How about the Olympic athletes, those 100 meters sprinters? They don’t just take up a weekend training and then suddenly get good at it.
It has been their entire life just for the Olympics, which occurs once every four years. It probably has been around 15 or 20 years of preparation.
Yet people come into trading thinking they’re going to be the best out there straight out of the gate, thinking they’re gonna make profits consistently from the market.
Clearly, those expectations are quite wrong. In this retail trading arena, many people just get their hopes high. They get lured in by all the latest marketing gimmicks and whatsoever and think that this is something that they can get good at within a short period.
It’s not gonna happen, and really, anything that’s worth achieving takes time, like the examples that I’ve just shared with you.
As you get more proficient, the competition gets lesser
What do I mean by this? If you think about it, Usain Bolt as the top runner in the world, do you think that he has any competition around him? No, because when you are the best, there’s pretty much no competition, because you’re already the best.
What I’m trying to say is that as a newbie, or as a beginner, there’s a lot of competition. There’s a lot of people trying to get into this new scheme, this hype, and many of them will just die out like flies.
They’ll just give up because at the first obstacles they face while those that can overcome those obstacles will progress. For those who progress, the competition gets less because more people leave the business.
And when there’s less competition and you’ll be kind of near the top, that’s where you will start gaining market share and make more money in the long run.
Look at the trading beginners with less than one-year trading experience, that is the most number of traders out there because everybody’s all hyped up, wanting to quit their full-time job to trade full time. A lot of people are at this stage.
But as you stay in this business for a few years the competition gets less because most would have already quit by then.
And as you get more proficient and you understand what it takes to be a consistently profitable trader, you can profit from losing traders who make mistakes.
There is no real shortcut in trading because the shortcuts always come with a cost. Can you justify the cost? I’m guessing most of the time you will not be able to justify the costs.
That’s all I want to share with you in today’s episode, I hope you got something out of it.
And with that said, let’s do a quick recap …
Recap
- You can easily grow a small account but there’s the risk that you’ll lose everything and more.
- Risk a fraction of your account per trade to grow a small account responsibly and steadily – the gains can be small, so you must manage your expectations
- The higher you go, the lesser competition there is because you get better
- Add funds regularly to your trading account because that’s compound interest on steroids
With that said, I have come to the end of today’s episode and I will talk to you soon.