How to Manage a Small Trading Account
Most traders who have just started trading usually do so with accounts that have small balances. The reasons vary, but It could be due to not having a lot of cash to trade with, or they may lack the experience to make confident trades with a large account.
Regardless of the reasons involved, it’s completely acceptable and normal to trade with a small account. Suppose you are looking for ways to grow your account and gain confidence in your trades. In that case, you can still learn the elements of trading by making a few adjustments along the way.
In this article, we will show you how the team at Simpler Trading grows a small trading account.
Identify a Valid Setup
When the markets are volatile, traders at Simpler Trading want to use strategies that have withstood the test of time and continue to work consistently. What could be considered an example of a safe entry and exit? Traders will do well to ignore the unimportant noise on the chart and focus on the high probability moment in time and the high probability target for the setup.
Simpler Trading founder, John Carter, has a preference for big moves and has demonstrated success with Google and Tesla in the past. When traders see a rare move setting up, such as Tesla’s increase of over 100% in a short period, they should take advantage of those opportunities.
However, those moves are the exception and not the rule. Having your finger on the pulse of the broader market gives you a feel for what you could expect to see in a stock you have your eye on. Veteran Traders who have been in the market have become acquainted with their inability to impose their will on it. The market is going to do what the market is going to do; the only thing the trader can do is adjust.
After an intense week in the market, traders should take a mental break to sit back and consider strategizing trading a small account. Rather than watching for the unexpected, traders should consider how to play the higher odds.
Video Guide on Trading with a Small Account
What is a Small Trading Account?
Many traders consider $10,000 as an ideal-sized small account. Although, traders can start with a smaller amount of capital to grow their accounts as they practice. Some begin with smaller accounts ranging between $2,000 to $5,000. Some traders start with as little as $500 or less. This is a choice based on personal risk tolerance. Remember, you should only trade with money you can lose, not the money you need to cover expenses.
Using something as simple as Google Sheets or Microsoft Excel, traders can track the beginning balance of their trading account at the beginning of the day and compare this to the end of each day. They should include the dollar amount, percentage of change, and any notes from that day.
Traders can take screenshots of the trades they take and link them to Evernote or another digital storage application. Essentially, traders can record and see their account growth in real-time and include the notes in their trading plans. Taking and having notes keeps trading (and life) lessons accessible. Tracking your NLV – account balance, net liquidating value – is your job. This is the rule for all traders of all account sizes and should be implemented from day one.
Join The Small Account Mastery Program
Trading can be difficult and complex, filled with risk, but you don’t have to trade alone. If you are looking for guidance and mentorship to help grow a small account, become a member of John Carter’s Small Account Mastery Program. Traders have the opportunity to trade with John Carter and Kody Ashmore and get real-time trade alerts. Join today and never trade alone.
How to Trade a Small Trading Account
Traders need to keep these key points in mind when working with a small trading account:
- Prevent disasters. This means looking ahead at what is the worst that could happen.
- Portfolio structure and management are key.
- Most of the time, you should be in 70% cash.
- When trading leveraged instruments, keep the losses small when you are wrong.
Traders with a $10,000 trading account containing $10,000 in call options that expire in seven days will be destroyed more often than not. With options, traders should avoid repeating a trade because it worked once, twice, or even three times. Having a solid portfolio structure and a strategy that includes reducing risks. This means traders keep losses small when you’re wrong.
How to Build Up a Small Trading Account?
Traders have found that squeezes in the indices have been scarce during the last few years. The big moves aren’t happening for traders in this market. However, your trading account can grow substantially if traders aim to increase 3% to 5% each week – thanks to the magic of compounding growth.
To grow a small account, your goal is to mitigate your losses. This might sound like a no-brainer, but most traders fail because their losses are more significant than their gains. One reason is that they didn’t follow their trading plan for exiting losing trades. Trading strategies can be scaled into a comfortable percentage of the trading account. Our traders suggest limiting position sizes to no more than 5% of the total account at any time.
Small account trading can result in 3% to 5% each week and still give a good return. You don’t need to push your luck to get the big trades when a 5% weekly goal can still get you consistent account growth over time. The most crucial step is to become consistent by identifying the right risk parameters to make gains and limit losses.
Starting with $10,000 and attaining a consistent 3% weekly return compounds an annual return of 375% – or $47,566. Not bad for a small account!
This means traders should make cuts to strategies that aren’t giving them those returns on their trades. Traders holding on to a losing trade should ask themselves what is causing them to hold on to it. What is the trauma they can’t let go of that doesn’t allow them to cut loose a losing trade?
It’s true that traders eventually discover that the key to successful trading is not in setups and strategies but in the trader’s mind. Trading is mental, and being brutally honest with yourself is an essential part of the process.
To attain account growth of 3% to 5% per week, traders will encounter difficult weeks and weeks that outperform. Still, the key is an average gain over several weeks or months. Even if they don’t meet the weekly goal, having goals with tested strategies is the key to continuously staying on the move upward, even in a volatile market.
Traders who get too complacent in the market can quickly lose a large percentage of their accounts. The market presents a few ways to succeed and even more ways to take a hit. Staying on top of the market and looking for a strong play is how traders can not just stay in the markets but grow trading accounts.
What are the Best Trading Courses?
Traders should treat their accounts as they would a business. A trading account should be maintained and looked after as if your livelihood depended on it. Having a mentor and a team of traders can improve your trading skills.
The team of expert traders at Simpler Trading was included in a list of The 10 Best Online Options Trading Courses of 2022 by Intelligent.com. All of our traders commit to providing the best education in trading, so we’re proud to have made the list.
Trading courses that keep traders on the path to successful trading and allow them to share strategies with like-minded traders will enable them to grow emotionally and financially. This means avoiding negativity and hysterical investment news sources and focusing on how to find the courage (and even humility) on your path to success.
Improving portfolio structure with varying time frames (based on setups) allows traders to stay in the market and continue to grow. This is why the team of traders at Simpler teaches strategies that keep traders in the markets. The team of traders at Simpler has made some of the best trading courses and tools available to traders with small accounts.
The Small Account Mastery, taught by Simpler Trading founder John Carter, and expert trader Kody Ashmore, gives traders clarity as they focus on ONE proven strategy. John demonstrates that consistency is the key to staying in the game. With a live-trading day with John Carter and fellow Mastery members every month, traders can use interactive sessions to level up to a more effective trading strategy.
Traders who have utilized the Small Account Mastery have repeatedly given the course credit for giving them the courage to brave the markets and grow their small accounts.
Small Account Secrets is a trade alert service offered by Simpler Trading. It includes an eLearning module for traders who prefer to work at their own pace. This trade alert service supports John Carter’s goal of generating weekly exponential gains. This service particularly appeals to part-time traders. Here, in addition to establishing a system to grow small accounts, traders learn how to adapt to up, down, and sideways markets.
Traders can work on mental focus and understand their natural tendencies to strategize better to prevent significant losses. Anyone who has spent time with John knows he doesn’t teach strategy without giving traders an insight into trading psychology and market sentiment.
Small Trading Account Strategy
Successful traders eventually learn that learning strategy doesn’t have to be complicated. There will always be complex markets and difficult days. But, having a mentor and a trading community allows traders to view the bigger picture and helps them stay out of the mire of the “could haves” and “should haves.”
When traders treat a trading account as a business, they can step back and not take the market personally. The key is understanding how the market works and applying a strategy to their trading routine. However, if you need guidance and mentorship, consider joining John Carter’s Small Account Mastery Program. Traders can join weekly live sessions with John Carter and Kody Ashmore and get real-time trade alerts directly to their mobile devices. Why trade alone when you can trade with us.
FAQs on Trading with a Small Trading Account
A: NLV is the net liquidation value of a trading account. In short, if all of the holdings were sold out that very day, what is the account’s cash balance? This is the NLV. Tracking this can enable traders to visualize goals and maintain a neutral mind.
A: There will be losses with the wins. This means that strategies that allow traders more wins than losses can ultimately provide a successful result. Understanding your psychological makeup can make you a better trader, but only if you can handle the losses. It’s essential to maintain focus on the endgame.
A: While most traders generally set aside $5,000 to $10,000 in a small trading account, Simpler Trading also offers the Profit Recycling Mastery, where traders can participate in the $500 challenge. Learning the ropes with smaller amounts of money makes sense for traders just starting out.
A: At Simpler Trading, our team of expert traders does not want to make it difficult for traders to understand the basics of trading. We now offer a Free Trading Room to anyone who signs up with their email. Our trading community also provides a $7 trial membership to allow traders to explore the community of traders and the courses they offer.
A: Some of our favorite indicators that our expert traders use at Simpler Trading are the Squeeze Pro, Ready.Aim.Fires! Pro, Phoenix Finder Turbo Indicator, and the Moxie Indicator™. However, those are premium indicators. If you are looking for free indicators, RSI, MACD, and the Ichimoku Indicator are great indicators to start trading with.