Start Trading with a Small Account
If you are a newbie trader, chances are that you have a very small account. In other words, you just don’t have much money to trade with. Yes, growing that account into something substantial is difficult, but nonetheless, doable. Today, we are here to provide you with the most important tips to start trading with a small account successfully and consistently.
How to Start Trading with a Small Account
Let’s go over the biggest hits that you need to follow in order to start trading with a small account successfully.
Manage Risk Levels
If you are starting with a small account, one of the most important things that you need to do is to manage your risk levels. A lack of risk management is one of the biggest factors that causes newbies to lose their money. By risk management, we mean that you need to control how much money you invest per trade. One of the most important rules here is the 3% rule.
This means that you should never invest more than 3% of your total trading capital into a single trade. If you invest far too much of your total trading capital into a single trade, if things go wrong, you will lose the majority of your money. However, losing just three percent is not a huge deal. Moreover, in terms of loft sizes, as a beginner in your first few weeks of trading, do not invest more than 0.01 or 0.02 lots per trade. Once you get more confident, you can invest up to 0.30 lots per trade.
Only Trading Strong Trends
When it comes to trading with a small account, another mistake that many newbies make is to trade against trends, or just trade with weak trends. People, if you trade with weak trends, against trends, or in ranging markets, your chances of making profits are very minimal. Yes, professional traders are able to trade against trends and still make money, but at this point, you are not yet a professional.
Trading in ranging markets or trading against friends is a short fire way to lose money. You need to use the appropriate tools to determine whether or not there is a strong trend present, and then only place trades if there is a strong trend present period the bottom line is that you should only trade in the direction of a strong trend.
Check Your Fundamental News
Whether you are starting with a small account or not, another very important thing that you need to do in order to be consistently profitable is to check your fundamental news calendars. Fundamental news is all about the news that happens in the world, the news that affects various currencies. If you can properly analyze fundamental news, then entering the right trades is much easier.
Now, what you need to look out for here is 3 star news. If you see any three star news associated with a currency, you need to avoid trading with that particular currency until the news has passed. News can have big effects on price movements of various currencies, and it is very hard to predict. Simply stay away from three star news currencies.
Take Profits Early
If you want to grow a small account consistently, the next thing that you need to do is to take your profits whenever possible. This means usually taking your profits early, and even before your take profit levels have been reached. One of the things that causes so many newbies to lose so much money is because they have a winning trade that they stick with for far too long. This winning trade can then turn into a losing trade.
Folks, it’s better to take the profits that you have rather than to wait too long and to lose everything. For this reason, we would recommend starting with a 1.5 risk to reward ratio. This means that if you make 50% profit on your initial investment, you should automatically close the trade office that you have already made. Waiting too long in the hopes of making more and more profits is a short fire way to lose your money.
Calm Down with the Leverage
If you are starting with a small account, you should definitely not be leveraging your trades. Some newtons think that leveraging their trades by factors of 500 to one is beneficial. Sure, if you win the trade, you make a whole lot of money.
On the other hand, if you lose the trade, you are on the hook for that full amount. Yes, leveraging trades is a great way to trade with more money than you have, but it’s also a great way to lose much more money than you can afford to lose. As a newbie trader, we would recommend not leveraging your trades at all, or at the very most, leveraging your trades by a factor of 50 to 1.
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Don’t Try to Make Up For Losses
Another thing that lands newbies in hot water when they have a small account is trying to make up for lost trades. Sure, everybody hates losing money, and everybody wants to make up for those losses.
However entering a gambling like mind state and starting to trade irrationally just to try and make up for those losses is a short fire way to lose money.
If you get emotional in trading and you start treating it like gambling, your chances of making profits decrease greatly. Trading or over trading to try to make up for losses is actually a great way to just lose more money.
Use Multiple Timeframes
Especially when you have a small account, another thing to keep in mind is that you always want to use multiple time frames to enter your trades. Relying on a single time frame to find trade entries is not a good idea.
There are things that you can see on a one day time frame that you cannot see on a 15 minute time frame, and vice versa. When you enter trades, you should look at one day timeframes, 4 hour timeframes, one hour timeframes, and 15 minute time frames. This will give you a good idea of what the bigger picture looks like, so you can find good trades to enter.
When you have a small account, consistency is definitely very important period if you have a trading strategy or method that is proven to work, and it works most of the time, then stick with it. If you happen to lose a trader 2, don’t automatically scrap your strategy and start something new.
It’s all about making small adjustments to make not for the errors that were committed. It’s better to master a strategy or two than it is to flip flop back and forth between multiple strategies that you never really learn how to use.
Your Start in Trading with a Small Account – Final Thoughts
If you followed the text as outlined today, then growing a small account consistently and quickly should not be much of a problem period the last point we want to leave you with for today is the fact that getting a good trading education is essential to your success. In other words, it helps to actually know what you are doing.
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