Whether you’re going into 2020 with a large or small trading account…Know this… Many traders mistakenly hold an erroneous notion they need a big account to trade the markets. I’ve got news for you… If you can’t cut it with a small account, you won’t win with a larger one! With stock commissions a thing of the past, there’s little reason anyone shouldn’t be able to build an account from as little as $500. Your strategy should never change. The key to success is adjusting trade management factors like position size, risk tolerance, and trade selection. Every week I get inundated with emails, asking me if Weekly Money Multiplier works with small accounts. I point to members like Mark, who doubled his within a week.
No, it’s not typical to double an account your first week out of the gate. However, I want to share some insights and tricks to work your small account into a nice nest egg.
Even during my best years, I never change the maximum size of my trades until the following year. It’s how I manage both myself and my money.Other traders I know follow the 5% rule. This popular method allocates no more than 5% of your total account to any one trade as a possible loss. I wrote about it extensively in an article a while back you can read for free. However, it can be challenging to trade $200 options with a $500 account. That doesn’t leave much room for error before you would hit 5%. So, you need to adjust your risk expectations. Risking 10%-20% is okay with a small account when you feel you have an edge. Just realize that you have a greater chance of one trade damaging your account.
Choose the right Instruments
Some stocks cost a lot of money to purchase even one share. In-the-money options could cost several hundred dollars. If you only have $500 in your account, a $200 option or a $1,000 per share stock might not work for you.I prefer to trade options that are at or slightly in-the-money on momentum stocks. These tend to cost several hundred dollars apiece. However, I have members that adjust the strike price and expiration to lower their up-front costs. This works the same setups but fits the trade to their individual needs.
Stick to high probability setups
Not all trades are created equal. Some simply have a better shot of profit than others. Small accounts should work to get modest, consistent gains. There’s nothing wrong with making $50 on a $500 over a month. You keep that up, and you’ll double your money in a year!High probability trades combine multiple clues to identify setups. For example, my TPS setup relies on a clear trend, consolidation chart pattern, and a squeeze indicator. These three items create a favorable matchup.
Be automatic in your profit-taking
Small accounts don’t have the luxury of letting winners run all the time. You want your money continually working for you, churning out trade after trade - that’s not the same thing as over-trading.I use the 127.2% extension as my first price target, and 168.1% as my second. If I traded a small account, I would cut everything at the first level. The incremental amount on a per-period basis wouldn’t maximize my capital usage. I’d do better taking a completely new trade.
Create a trade journal
I talk about trade journals all the time in Weekly Money Multiplier. In fact, I have one that I make public to all the members to hammer home this fact.
Notice how I capture all the relevant details to the trades. I also keep a secondary log that takes screenshots of the setups so that I can review them later.I cannot stress enough how invaluable this is to driving success.
Leverage simulated accounts
Let’s be honest, if you’re trading a small account, you’re probably new to trading. So rather than learn by losing, use a simulated account.
I have members that struggled for years switch over to a simulated account when they first start with Weekly Money Multiplier. The way I trade may not be the same as anything they’ve learned.
They take the opportunity to focus on their trade management and skills without the stress of turning a profit. It lets them work on decision making, which is a key component of any trading strategy.
Don’t be afraid to fail
Blowing up an account isn’t a sign of failure. It’s almost a right of passage. Most successful traders go through 5-8 before they actually turn a profit.If you haven’t heard my full story before, check out my interview with Jeff Bishop and Jason Bond, where I talk about how I struggled before I finally turned my $38,000 account into $2,000,000. It’s a free video you can check out here.