I received a lot of intelligent questions about my trading process and strategy.
But the top question I received was…
How Do I Grow A Small Account?
Rather than give a boilerplate answer, let’s approach it from a different angle.
That’s why this week, I’m laying out a 90-day plan on how to grow a small account.
Here’s the thing – this same plan should work on any size account.
It’s the same one I used to grow from five figures to seven.
And if taken seriously, it can be a true game changer for you.
Wouldn’t you know it, I have to lay out some ground rules. But, think of them more like guidelines. They’re meant to provide structure to the challenge.
To start with, I always advocate starting out with a paper trading/simulated account. It’s a great place to learn without losing any money.
Note: You should be aware of the limitations in paper accounts. They will often show better fills than what you get in real life, so be conservative when you review your progress.
Second, start with one strategy. There’s tons of them out there, and we all want to make money now.
I did the same thing for years, bouncing around from idea to idea. It wasn’t until I sat down and focused on my core TPS Setup that things really turned around for me.
So do yourself a favor, get really good at one setup before adding on more.
Weeks 1-4 – Establishing Baselines
The first month is about collecting data. None of us know whether our strategies will work right out of the gate.
Yes, you can copy a mentor, but it doesn’t always work out the same. I can tell you from personal experience that you can have all the trades from someone laid out for you in black and white and still not copy their success.
Besides, trading is way more fun when you achieve the results on your own.
Now, I’m a big advocate for journaling your trades. This helps you keep track of your performance and identify strengths and weaknesses in your trading.
Here’s a snapshot of what mine looks like.
Notice that I include the relevant dates, prices, as well as notes about the type of setup. I want to make sure I understand exactly what I’m looking at when I review the trades.
From there, I want to figure out what is my win-rate and my risk/reward. As I go along, I want to try to achieve a consistent win-rate and then tweak my risk/reward until I’ve hit profitability.
Weeks 4-8 – Optimization
In the second month, I want to focus on optimizing my trading. The first month collects all the data. Now, I want to make my trading better.
There’s a couple of concepts that I want to work on here. First is learning how to scale in and out of trades. With small accounts, this may be difficult and sometimes not possible. However, I want to get a feel for it regardless.
Along the same vane, I want to focus on one setup. I don’t need to have a trade every day. In fact, working a few trades a week teaches excellent discipline.
Once I’ve got a good handle on my setup, then I’ll start expanding it to other areas. For example, one of the first changes I made to my trading was taking my TPS setup from daily swings to shorter timeframes such as hourly charts
Weeks 8-12 – Starting slow
By the third month, I want to feel comfortable with my trades. I should be able to quickly identify setups and know what my entries and exits look like.
Now, I want to start adding in the real money element. This is where capital management comes in.
My journal should have enough data collected to tell me exactly how much I should expect to win or lose on any given trade. I can use that to determine how much of my account to risk.
In general, I never want to risk more than 5% of my account on any one trade. However, this is where a noticeable difference comes in between small and large accounts.
Depending on the size of the account, it may not be feasible to do 5%. If my account is $500 and the option contract is risking $50, then I’m already at 10%. That’s one of the main tradeoffs to working with small accounts.
So, to counter this, I wait for the highest probability trades I can find. There’s still a chance I can lose, but at least I’m giving myself the best shot possible.
A great setup to start with – My TPS
You get to learn how I journeyed from a losing trader to turn my $38,000 account into over $2,000,000 in just two years.