Strategies for Growing a Small Trading Account
Every trader wishes to start with a full account, but not everyone has that kind of money. So, how can you build up from a small trading account?
In this guide, we are going to present strategies that will help grow a small trading account.
Take a conservative approach
Traders with more significant trading accounts have the luxury of taking high risks. For instance, they can place larger stop-losses. Traders with a small account need to take a more conservative approach and keep their risk-reward ratio in check.
Many beginners are tempted to take high risks if they see some profits, but this is not the best route to take. Trading a small account requires strict risk-management, as there is no shield for losses.
For example, if a trading account only covers its required margin by $100, and it takes a $150 loss, the account will become untradeable, and you'll lose all your money.
To counter losing money, there is a rule; the once percent. Following this rule means that you don't lose more than one percent of your total amount. But it doesn't mean that if you have a $500 account, then you can only trade with $5; the one percent rule applies using stop-losses and profit targets.
Have a clear trading strategy
No matter how many strategies you apply, there has to be one strategy that you know like the back of your hand. Because this strategy will help to turn your small trading account into a bigger one, many professional traders have at least one signature trading strategy that they can rely on.
To develop a trading strategy, spend a few hours trying different variations, and the best way to do that is on a demo account.
Using a demo account will help you learn more about your strategy, and you will be able to analyse and learn from the outcomes without losing any real money.
Be Patient and Disciplined
It's essential to remain patient and disciplined throughout your trading journey. If you want to build upon your small trading account, you have to master these two qualities.
Being disciplined in trading means not losing more than you can afford. It is always good to enter the trade with the right plan that outlines how to manage risks and define entry and exit points. You can apply the one percent rule here.
Many novice traders tend to be impatient. For example, if they lose a trade, they re-enter the trade without a strategy to recover losses. However, this turns into a counterproductive move, and they lose again. It's essential for small account owners to not get carried away and keep their emotions intact. This is not a get-rich-quick scheme; trading takes time.
As the saying goes, "Plan your trades and trade your plan."
Learn from your mistakes
The good thing about using a small trading account is that you can learn from mistakes without giving a severe blow to your account. Losing $100 is better than losing $100,000.
Every trader makes mistakes; no one is perfect. It's vital to learn from these mistakes and move forward. By applying proper risk-management strategies, you can reduce the quantity of these mistakes.
The Bottom Line
If you own a small trading account, trying out these simple strategies will help grow your trading account. This guide's takeaway is to enter every trade with a proper plan, have a clear strategy, and keep your risk-reward ratio in check.