Trading Wisdom | How to Quickly Double Your Wealth On a Small Trading Account

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Do you feel troubled by having too little money in your account? Do you think your lack of success in trading is related to the size of your capital?

In trading, most people start with a small amount of capital, typically ranging from a few hundred to a few thousand dollars. This type of small capital account cannot withstand large market fluctuations. Therefore, many people believe that their trading performance is related to their initial capital. They think that with sufficient capital, they can become profitable traders more quickly.

In reality, the size of the trading capital does not necessarily determine whether one will be a successful trader. Many people have trouble managing even small accounts, so what makes them think they can manage larger ones? Different account sizes require different strategies and approaches; many people struggle with small capital accounts mainly due to inappropriate strategies.

Large and small capital accounts each have their own characteristics:

Large capital accounts: They have a stronger ability to withstand drawdowns and can set wider stop losses. Once the stop loss is triggered, the losses can be substantial. There is a greater profit potential, but the return period is longer. Large capital accounts are more suitable for trend trading.

Small capital accounts: They have a weaker ability to withstand drawdowns, and the space for setting stop losses is usually smaller, typically close to the current price. Therefore, the absolute losses are relatively small, and the profit period is shorter, providing traders with quick emotional satisfaction. Small capital accounts are more suitable for short-term trades.

In summary, based on the characteristics of large and small capital accounts, large capital is suitable for trading trends, while small capital is suitable for short-term trading.

Many of us start trading with small capital accounts, so let's mainly focus on small capital accounts.

Determine your trading goals

For small capital traders, it is important to determine their trading goals. Are they looking to invest additional funds while having a regular job to increase their wealth, or do they want to trade full-time to make a living? This clarity is crucial because it determines the actions and trading approach in the initial stages.

For those who have a regular job and wish to make investments with extra funds, they need to have a clear understanding that the ultimate goal is to preserve and grow their assets, not to get rich overnight. These traders should have a clear expectation, which determines whether they choose an aggressive or conservative approach. They should also remind themselves of why they entered the market in the first place.

If someone intends to trade full-time but has limited initial capital, and assuming they have no other sources of income, the initial focus should be on accumulating funds within a short period while ensuring their ability to survive.

The principle of survival is a must for these traders. Regardless of the capital size, they must learn to survive in the market first, as it is only then that they may gain the desired profits. We have mentioned in previous discussions that trading with a low position size can increase the chances of survival in the market. However, it may be difficult to accumulate capital rapidly within a short period using this method.

Therefore, if someone aims to pursue a career in trading with a small amount of capital, they must take greater risks, and low position trading may not be suitable. This does not mean that one has to go all-in on every trade, but rather to wait for opportunities and be bold in seizing them when they arise.

The success of many small capital traders often involves an element of luck, and depends on whether they can seize opportunities when they arise. Many traders have started with small capital accounts, and some have managed to accumulate initial capital by catching a bull market in the stock market. In the forex or futures market, numerous short-term traders have been able to quickly accumulate wealth within a short period by leveraging a significant market movement in a specific asset.

What should small capital account traders pay attention to in trading?

For small capital accounts to grow quickly, many people have taken the path of focusing on market opportunities and trading heavily.

In theory, it is also possible to double one's capital quickly through the power of compounding. For example, if one wants to double their capital within a month (assuming there are 22 trading days), they need to achieve an average of 3.2% daily returns over 22 trading days. This is the most difficult part - achieving an average of 3.2% daily returns. The time required to double the capital (n) is inversely proportional to the average return rate (i).

Therefore, for most people, the first method, although riskier, is easier to grasp if they want their small capital account to grow quickly. If someone wants their small capital account to grow rapidly in a short period, they need to be aware of the following issues:

1. Survival comes first. Regardless of the account size, this is the primary rule. Traders should always remember their survival line, set stop losses and take profits for each trade, and avoid being speculative or greedy. Each loss should not exceed 10% of the trading capital, ensuring that they have enough capital to execute the next trade after a loss.

2. Focus on short-term trades. The major drawback of a small capital account is that it is relatively weak in terms of handling drawdowns, and even a slightly larger drawdown could lead to a margin call. Therefore, it is best to focus on intraday short-term trades, as mentioned earlier, to engage in short-term trading. For instance, traders can focus on trading primary upswings one after another. As the saying goes, small boats are easier to turn, so traders can leave the market after completing a profitable trade without being greedy.

3. Limit the number of trades, regardless of gains or losses. It is best to avoid making more than three trades per day and refrain from trading further after experiencing two losses. This is to prevent the influence of emotions. Moreover, traders should take profits when necessary, without being tempted to continue trading just because all three trades on a given day have been profitable. Limiting the number of trades also means being patient and waiting for significant opportunities to occur.

For some full-time traders, the biggest challenge is that the returns from small capital may not be enough to cover their expenses. Therefore, they may feel anxious and may be tempted to trade more frequently to increase their income. However, the quality, not quantity, of a small capital account's growth is essential. Increasing the number of trades may lead to quicker elimination, and it is challenging to achieve rapid capital accumulation.

4. Trade one instrument at a time. It is unrealistic for small capital account holders to diversify their investments across multiple instruments because their capital is limited. Simultaneous trading of multiple instruments can reduce the ability to bear risks and further increase potential losses.

5. Seize significant opportunities. If someone wants to grow their small capital account quickly, solely making small profits each day may take a long time, as mentioned in the compounding model. Therefore, to achieve rapid growth, one must seize opportunities. After seizing an opportunity, it is essential to patiently wait for the next one, emphasizing quality over quantity, rather than increasing trading frequency.

6. Increase position size with prudence. As we have mentioned several times before, traders should avoid heavy trading. However, if someone aims to achieve rapid growth, they must be willing to increase their position size while seizing opportunities. Do not fear heavy trading at this stage, nor equate heavy trading with a margin call. Most traders experience margin calls not because of high position size but due to imprudent trades, frequent stop losses, or not employing stop losses.

Conclusion

The success of trading is independent of the account size and depends on one's ability to control trading effectively. For small capital traders, treating their small accounts seriously, just like large ones, is more important than being indifferent due to their limited funds. Each step should be planned, consistent, and patient, yet decisive whenever necessary."

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