★ How to Trade with a Small Trading Account!
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Trade Sensibly: Spreadbets/CFDs/forex trading is high risk!
How can you trade/invest efficiently with with low capital? What's the best trading strategy for people with low capital? If you only have GBP250 or USD300, what's the best strategy going forward?
This is a very common problem; in a perfect world you have a large amount of capital to trade but fortunately these days most online brokers also accommodate small traders.
But what's the best way to use this money to learn to trade? The worst you can do is to utilise as much leverage as you can and trade with the biggest trade size possible. You might have a run of good trades but on average you won't last more than 10 trades. You might double or triple your money and then lose it all or you'll lose it straightaway. That is pure gambling.
What you want to do is to make the money last as long as possible to help you learn the most. How do you get the best returns in terms of education?
First open an account with a broker that allows you to trade with GBP250. You want to trade a strategy that has a long time to play out. Even though I'm a day trader and I love day trading I wouldn't day trade if I were limited to a very small balance. I would look at swing trading, holding positions for multiple weeks or months and I would trade the smallest size possible. And this is what you want to do - you want to trade with real money as that means you have some skin in it and there's some meaning to your trading.
Related Videos [not exhaustive - simply use the search function on this channel to find more related videos]
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Why Trading a Small Account is a Big Advantage 👍
An even more fun way to do this, which requires even less capital, is swing trading cheap options. With brokers such as tastyworks, or even robinhood and the like, it costs almost nothing to trade these, and there's no account minimum. In our case we'd simply be playing the same moves as equities, but leveraging up the percentages buying and then selling options to flip premiums instead of buying/shorting the underlying stock. Trading options is more complicated than trading equities, but it's actually pretty simple and intuitive, and actually a lot more fun and flexible (outside of being limited by time decay) than simply trading the underlying instrument. Due to the incredible potential volatility in options premiums, it opens up a whole new set of strategies that are all based on the same underlying moves, depending on which options bought.
Even if you only want to throw down $10-60 at a time, there's plenty that can be done in options land. And remember, at those prices, the volatility can easily lead to 40% moves, 100% moves, 300% moves, even 1,000% to 20,000% moves from time to time. Of course, there's more built in risk to the amount invested in terms of percentage. With cheap options it's very easy to lose a substantial % of the $ invested, but with such a small capital investment, and such large winners, the total risk in terms of capital is low, and the risk/reward can still be very good.
I started trading with 20$ and turned it to 400$ in 3 months but unfortunately broker was scam and rejected to pay to me under a lot excuses etc .. by the way i started again with 15$ with respectable broker ..
this guy doesnt know much. How can you do a pound a pip with 250? 1 lot=£10 a pip. 0.1 lot = £1 a pip. 0.01 lot = 10p a pip. With 30:1 leverage (which is max you can have with EU brokers) you could only have at most 0.06 lots about with £250. so 60p a pip. Correct me if I am wrong? Can anyone do calculations? I am not very good at it.
I agree with you 100% paper trading doesn't work psychologically. I enter into small swing trades $50/$60 dollars at a time, my goal is 20% to 35% returns per trade. I make 2 to 8 swing trades a week. At this stage, it's more about a consistent winning strategy than it is about the $ize of my profits. Thank for your video.
As one that did it (started with $2K account instead), I totally agree. With a small account, it is preferable to opt for swing trading. It allows you to still make money even if the entry point isn't that perfect. With day trading, it is better to enter into an already profitable setup since you don't have that much time to wait for the price action to turn favorably. For what I have experienced, losing trades tend to grow quicker than winning ones. It is tougher to hang on to winners that retrace quite a lot since retracements can potentially linger or can turn out to be major market shits that ultimately will eat away at profits. That's why making a lot of money on one trade is challenging especially if your trading size isn't that significant. That explains why risk management is at the heart of longevity in the trading world. But no matter how careful you are, the market will find a way to sting you once in while. Oftentimes, the setup is perfect and all the conditions are met but for some unknown reasons, the market does not agree with your analysis. That's why accepting to be wrong early on is one MAJOR quality to have as a trader.
Great advice, as always. But on the demo account, I don't agree. A demo is a great way to practise certain things. For example, I have used it to learn and practise shorting and figuring out the correct position sizes. And I have also found it invaluable in building self-assurance.
I've been trading for just over 3 years now, and in a way I disagree with this approach. If you're taking 2 or 3 trades a month, the likelihood is you'll end up placing FAR too much significance on each individual trade. You will see things happen in the markets - a certain price behaviour for instance, that you've observed 10 times over. You interpret it as significant, when in actual fact, it's not at all. It may have taken you 7 or 8 months of trading to make those observations, and feel it is a sure thing. Only when you've reached 100 - 200 or more trades, do you then realise that what you thought was a sure thing, actually isn't that significant at all. Only, it's now taken you several years to find that out. Oh, and then to compound issues, only after 3 or 4 years you'll realise that you've not been recording your trades properly (as practically nobody does to start, including myself!).
IMO, far better to trade small and trade frequently to build your experience. You may be out of the game faster than you would swing trading, true. But you will have achieved critical market exposure (not market cycles), and been through the usual collection of psychological factors, in a far shorter space of time. Just my opinion, offered as an alternative view.
Makes sense. I lost about 10 grand in 3 years and gave up in despair. Since I've come back to it I've managed to turn £200 into £660 in a couple of weeks by swingin' like Frank Sinatra and trying to go with the flow. I appreciate the videos, thanks and good luck.
Thank you for sharing again. I started a couple of months ago and accidentally ought gold when it was right time. Left if for a week and from a few hundred quid made a decent sum. Then burned yesterday half. Now doing your strategy and it helps. Luck is not common especially the one I’ve had. Trading is serious and can eat your money. I’m going through your videos again and again. Sounds easy when you say but hard in reality. For me at leas
Cy Ka what works for me is swing trading a few times a month with 2-3 week breakout trades about twice a month. Saves on commissions. Day trading kills me. Plus I don't have to live in front of the computer screen. I like to do other things in life too. :)
kim knott Great point, this is why I started out with a £100 account. My thinking is that if I cannot make money on a small account then why in earth would I make money with a larger account.
Using a small account allows you to get experience and improve your trading skills.
Hi there, I recently discovered your channel and i am a fan of your work. I am just wondering if there is a video where you introduced yourself and talk about your trading history? Just curious to know. Thanks!
I have a couple but this could be an idea to expand on for future material
How My Trading Style Evolved Over Time: https://www.youtube.com/watch?v=JK9Qz8FDcRU
How I used to Make 'Easy Money' from Trading Algos - A Story: https://www.youtube.com/watch?v=5Ffwwuoe-dk
Agree, the focus should be longevity of the small account. I only trade to a max of 0.10 to manage losses, if ever there are. Than wiping out the account in just a few days or worst in just a few hours. Slowly but surely!
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