This useful trading tips will help you to efficiently start trading with a small trading account.
A quick note: by a small account, I mean an account size from 10$ - 2000$.
1 - Trade less often
Small account implies a limited amount of money for trading. It means that among dozens of trading opportunities that you spot during a trading day, you should carefully pick only the most promising ones.
I recommend opening maximum 3 trades per day.
2 - Stick to one strategy
One of the ways to trade less frequently is to stick to one single trading strategy. Most of the traders do completely opposite: instead of focusing on one approach, they prefer to trade multiple ones simultaneously.
Trading various strategies requires a lot of capital. The more strategies you follow, the more margin is needed.
With a small trading account, you are risking being left without a free margin for all the trading opportunities that the strategies provide.
3 - Trade liquid instruments with low spreads
When you are picking the financial instruments for your trading, make sure that you select the most liquid ones. You can assess the liquidity of the instrument by a spread. The bigger is the spread, the less liquid is the asset.
Take a look at a spread difference between EURUSD and CHFJPY.
The spread on EURUSD is 0.1 pip.
While the spread on CHFJPY is 2.7 pips.
Spreads directly affect the costs of trading. Bigger spreads reduce the potential profits and increase the risks.
Make sure that you choose the assets with the lowest spreads possible.
4 - Shorten the list of trading instruments
One more option to trade less often is to narrow down the list of your trading instruments. I recommend choosing the maximum of 7 instruments.
EURUSD,
GBPUSD,
USDJPY,
USDCAD
NZDUSD
AUDUSD
USDCHF
is a perfect watch list for a small account trader.
5 - Don't trade higher time frames
Be careful when deciding a time frame to trade.
Remember that the higher is the time frame, the bigger are the stop losses for your traders.
On the left chart is the swing trade that I took with my students on EURUSD chart on a daily. While on the right is the scalping trade taken on 30 minutes time frame.
A stop loss for swing trade is 90 pips and a stop loss of scalping position is 19 pips.
Big stop losses require more free margin and limit the amount of the trades that you can take simultaneously.
For that reason, prioritize lower time frame trading with a small trading account.
6 - Don't risk more than 2% per trade
When traders trade with a small trading account, they often risk a huge portion of their trading account per a single trade.
If you have 100$ trading account, and you risk 20$ per trade, the nominal value of that risk does not look huge. But from a percentage standpoint, it is 20% of the total balance.
Just a 5 trades losing streak will blow such an account.
Make sure that you apply a position size calculator and risk no more than 2% of your account per trade.
Following these recommendations, you will be able to build an effective trading plan that will help you to grow your capital quickly.
