When working on growing a small trading account, it can be tempting to take excessive risk. In fact, that's what a lot of trading sites will tell you to do.
But taking too much risk will ultimately end in a blown account.
So what's the solution?
Is growing a tiny account even possible?
Sure, but it takes some patience and creative thinking.
In this post, I'll give you 9 sustainable tips for growing a small trading account.
Remember that this also assumes that you already have a trading strategy that has an edge. If you don't have that yet, work on that first!
1. Use Proper Risk for Your Account Size
For starters, be sure that you are taking the right amount of risk per trade. For most traders this is less than 2% of their total account, per trade.
If you are just starting out, then consider taking 1% or less, and move up from there.
Yes, risking a small amount like this, seems like it won't grow your account very quickly.
But here's the thing…
Growing a small trading account is all about consistently. Consistent wins compound to big numbers, over time.
…and if you lose all your money, you'll have no account to trade with.
So the key is to take a small amount of risk, but figure out ways to win a lot more than you lose.
This can be done with either a high win rate, or a high multiple-of-risk return per trade.
You might consider taking more risk on a case-by-case basis, like when you are super-sure about a trade.
It may seem like a step backwards, but it's the best way to establish a solid foundation. Once you are consistent, then you can consider risking more.
2. Don't Withdraw Money, Let It Compound
Once you start making money in trading, it can be tempting to take some out to pay your bills or buy some toys.
But if you want to grow your account as quickly as possible, you should resist the temptation to make a withdrawal.
Let the magic of compounding work for you.
Find other ways to pay your bills, while you build your account.
3. Stop Comparing Yourself to Others
It can be easy to compare yourself to others. That's what most of us are wired to do from a young age.
But comparing yourself to others usually brings about feelings of impatience, frustration and inadequacy.
You are only really competing against yourself in trading.
So be happy for successful traders…but don't measure their success against where you think you “should” be.
There's no “should.”
Only the reality of where you are now and the work required to get where you want to be.
So stop following #lifeofatrader and #bitcoinbillionaire on Instagram, and get to work.
4. Look For Ways to Amplify Your Trading Strategies
Alright, now let's talk about trading strategies.
Many struggling traders jump from system to system, in search of gigantic returns.
But in reality, you may be able to take a your consistently profitable strategy, and simply “turn up the volume.”
Here are some ideas to get you started:
- Can you add to your position, once it's in profit? This is one way to do it.
- Can you simply risk more per trade? This guy will risk up to 10% on trades that he's really sure of.
- Can you leverage your wins (or “house money”) on your next trade to double your return? If this interests you, test this concept.
- Can you set a closer profit target to improve your win rate? Consider testing a 1R profit target.
- Can you set a tighter stop loss? Tracking your MAE can help with that.
- Can you set a profit target that's further away, to improve your average return per winning trade?
- Can you trade 2 positions…one at a close profit target and one at a further profit target?
Give those methods a try and see if you can improve your returns with an existing trading strategy.
Remember to test these ideas extensively before risking real money.
5. Focus on Your Trading Process
Your process and mindset are much more important than your actual trading strategy.
Implement Backtesting and Beta Testing before you trade in your live account.
This process is important because it gives you important data about a trading strategy and how it works for you.
In addition, it allows you to focus on specific elements of your trading to see if they work individually. When you break them out like this, it's easier to see where your issues are.
If you jump into live trading right away, it's really hard to tell if your issues are in your risk management, strategy or psychology.
To get a complete explanation of the process, read this post.
Backtesting is a fast way to find out if a strategy has an advantage. You can test hundreds of trades in a few days, whereas it could take weeks, months or even years to get the same data in Beta Testing alone.
It also removes the emotional element of trading, so you can evaluate the strategy itself, not your trading psychology.
Beta Testing (or forward testing) brings your emotions and lifestyle into the picture. Now you can see if the strategy will be a good fit for the way you see the markets and your schedule.
If your Beta Testing does not line up with your Backtesting, then your Backtesting data can help you understand why. Without Backtesting, you are flying blind and are likely to give up on a strategy.
…and that usually leads to a ride on the Trading Silodrome.
Live Trading is the final step and now it's time to bring your money psychology into the picture. Is your psychology strong enough to handle the rigors of trading your full-sized account?
If your Backtesting hit your goals, and your Beta Testing was similar…but your Live Trading sucks, then it's time to consider lowering your risk per trade, or improving your psychology.
Also, don't put unnecessary pressure on yourself by setting daily or weekly goals.
Take what the market gives you, journal your trades, review if you are missing trades, and keep getting incrementally better every day.
6. Add More Trading Strategies
Some traders get so focused on maxing out their current strategy, that they forget that they can also add more strategies to increase their returns.
If you have something that's working and you don't want to mess with it, then don't.
Just look for a new strategy. Be sure that the new strategy doesn't take similar trades to your first strategy.
So if you have a trend trading strategy, then consider testing countertrend strategies.
How were the pyramids in Egypt built?
One block at a time.
Take the same approach to your trading skills.
Add one strategy at a time and you can build an impressive trading account.
7. Review Your Discretionary Spending
This is an area that you might not have thought to look when building a trading account, but it can be an easy win.
To get started, track your expenses for 30 days.
Use an app, spreadsheet, or a notebook…whatever works for you.
Be sure to record every single thing that you buy.
At the end of the month, take a look at what you spent money on.
Is there any way that you can reduce your expenses?
Maybe you can, maybe you can't.
I'm not saying that you should live like a monk and not buy a coffee in the morning.
But maybe you don't need to go the tanning salon every week…
If there are a few things that you could cut out and wouldn't miss, then put the money you would have spent on those things into a separate bank account.
At the end of the month, move that money to your trading account.
Growing a small trading account isn't just about how much money you make. It's also about how much money you can add to the account.
8. Sort Out Your Job Situation
Did you quit your job to trade for a living?
I've never heard of that working, unless someone was already making enough money in trading to cover their expenses several times over.
If you did quit your job and trading isn't paying your bills, then go find another job.
You'll need that stable income to maintain the correct mindset for trading.
Maslow's Hierarchy of Needs comes to mind here.
If you don't take care of your psychological and safety needs (will I go hungry?) first, it's almost impossible achieve the higher levels of esteem and self-actualization…which are required for successful trading.
So take care of your basic needs first.
Then go after those big trading goals…
Already have a job? Great!
Keep that job until you can cover your monthly expenses by several multiples with trading.
Trading usually won't provide the same consistent pay every month, like your job. So take that into account.
Hate your job?
That's the biggest reason a lot of traders quit their jobs prematurely.
Find another one.
It can be easy get stuck in a rut at your current job. There are options out there, explore them.
But for your next job, prioritize:
- Lower stress
- More interesting work
- Less commute time
- Better hours
- Co-workers you actually like
Sure, you may have to take a slight pay cut. But you can also work on lowering your expenses.
…or maybe not. You might actually find a job that pays more!
You will never know until you try.
Be willing the explore all of the possibilities. It might be a job in an industry that you've never worked in before.
Having a job that you like can free up a lot more energy and mental capacity for trading.
9. Look For New Cashflow Sources
Finally, find ways to add new sources of low-maintenance cashflow to your life.
In most places in the world, there is an abundance of money lying around.
Well, not money per se, but opportunities to make money.
The skill is to be able to identify these resources and turn them into steady streams of income.
Here are a few ideas to get you started…
- You may be surprised how much some of your “old stuff” is worth. Those items can be sold locally or online.
- If you have skills that are in demand, you can setup an online store to sell your products, or offer consulting services.
To get more ideas, read this blog post.
Put all of the profits from your new endeavor into your growing trading account.
Just one additional income source can help you grow your trading account balance significantly.
So always be open to new ideas to make money.
Final Thoughts on Growing a Small Trading Account
Building a small trading account to a point where you can start trading for a living isn't only about having a high win percentage, or taking high-risk trades.
It's about taking inventory of all the skills and opportunties that you have in your life and growing your account in a sustainable way.
Be willing to consider all of the possibilities, from both inside and outside trading.
Is there something that wasn't mentioned above that has helped you build your small trading account? Let us know in the comments below…