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Is it possible in these days to trade with a small trading account?
Should an undercapitalized trader save more money before he starts to trade?
What should the trader with small trading account focus on?
These are the most frequent questions the existing as well as new traders face who can’t risk too much of their funds.
Different statistics prove us that trading with undercapitalized accounts is much harder. And if the traders do not learn how to work with “financial” stress properly, it’s usually better to wait with real trading for a while to acquire enough funds you can risk for trading.
However, if you belong to traders who have decided to try it even with a “small” trading capital, some hints, we have prepared for you, could help you to find answers for the above-mentioned questions.
Minimisation of losses in spite of efforts to achieve high profits
In trading it shall apply that small account can’t make high profits with low risks so bear this in mind and don’t focus thereon!
Focus rather on minimal losses. Minimisation of losses should play the main role for each trader.
Considering strengths and weaknesses of small trading accounts
Think about the fact which markets are the most sensitive for your trading account.
For example, if I have a small trading account (low funds), I should not be trading indices where a relatively high amount of funds is necessary for the positions.
Trading discipline represents also a strength or weakness of trading account (depending on trader). If this is the fact that you would consider as a weakness, then it’s necessary to find a way how to eliminate this weakness, otherwise it could have fatal consequences for your trading account.
Strengths are e.g. strict planning and patient waiting for the “most appropriate” situation.
Minimisation of financial stress
In the event you trade with small trading account, your household expenditures should not be dependent on this account in any way.
Besides the trading incomes, you should have another kind of permanent income that could reduce your trading stress subsequently.
Try to increase your trading capital as much as possible. However, don’t do that with money you can’t afford to lose or which could affect your mental stability in the event of their loss.
Consider the use of financial leverage
Financial leverage may be dangerous potentially. Wrong use of financial leverage and extreme risk-taking may ruin trading account of any size by each trade. However, in case of small trading accounts, the effect of financial leverage is necessary in case of certain markets (otherwise, there’s the danger that there are not enough funds for margin on such trading account).
One reasonable hint tells us that financial leverage should never be increased for the purpose of increasing the trading volume, but only for the purpose of reduction of retained trading margin.
On the other hand, the use of financial leverage allows us to trade with much lower capital to achieve potentially higher profits. Therefore, it’s very important to learn how to use financial leverage properly.
Setting of real objectives
Don’t try to achieve unreal goals, come back to Earth.
To stay realistic with a small trading account means to realize that you won’t trade each day and you won’t risk everything. It’s not necessary to trade only because of the fact that the market is open and because it moves in certain direction. The best way how to become successful is to determine the size of open position properly, to wait for the right opportunity and to take advantage thereof subsequently.
Such patience, persistence and right choice of volume of trading position and risk reduction in each trade is what differentiates those successful from those who are not successful.
If you’re interested to try trading in practice for free and free of any risks, don’t hesitate to try it on our demo account that you may open online and for free on our website: www.purple-trading.com
About the Author
Team Purple Trading
Purple Trading is a true and 100% fair ECN / STP forex broker providing direct access to the real market. High speed orders execution, no trade-offs, no limits for any type of trading, the most advanced trading technologies. Explore more about Purple Trading at www.purple-trading.com .
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74.8% of retail investors lose their capital when trading CFDs with this provider. This value was determined within the period from January 1, 2018 to December 31, 2018. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trading forex exchange with margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could lose part or all of your initial investment and therefore you should not invest money that you cannot afford to lose. Seek independent advice if you have any doubts.
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