"Think I Need a Bigger Account"

[CType 10]

Well I almost hate to ask this, but would like to hear your suggestions nonetheless.

 

In the many books and post I have read, one thing always stands out. "Don't trade with money you can't afford to lose." Not sure I like the idea of losing any money, but I get the idea. I can't afford to lose much so my account is very small. The good news is that I haven't lost my money, the bad news is it's not exactly growing either. The problem is if I apply money management to position sizing the number of shares are so small that just covering commissions can take several days. This makes me think I'll need to break some rules and just take my chances.

 

I could:

1. Increase my risk from 1% to 2% or more.

2. Always buy no less than 100 shares, and just run tight stops.

3. Stop being so cheap and put money I can't afford to lose in the account.

 

Are there any strategies for small accounts? Is there a minimun practicle account size?

I suppose it's really too small for swing trading, but It's going to have to do.

 

Thanks

Bill

[Predictor 11]

Forget the 1%/2% risk.. it doesn't mean anything without probabilities..

 

Futures are probably better for small accounts.. you need leverage..

 

 

Well I almost hate to ask this, but would like to hear your suggestions nonetheless.

 

In the many books and post I have read, one thing always stands out. "Don't trade with money you can't afford to lose." Not sure I like the idea of losing any money, but I get the idea. I can't afford to lose much so my account is very small. The good news is that I haven't lost my money, the bad news is it's not exactly growing either. The problem is if I apply money management to position sizing the number of shares are so small that just covering commissions can take several days. This makes me think I'll need to break some rules and just take my chances.

 

I could:

1. Increase my risk from 1% to 2% or more.

2. Always buy no less than 100 shares, and just run tight stops.

3. Stop being so cheap and put money I can't afford to lose in the account.

 

Are there any strategies for small accounts? Is there a minimun practicle account size?

I suppose it's really too small for swing trading, but It's going to have to do.

 

Thanks

Bill

[BlueHorseshoe 10]

You could start putting money aside until you have enough in an account (that you can afford to lose). There will still be plenty of trading opportunities in one or two years time, so there's really no rush. Whereas on the other hand, if you do rush, and in some way overtrade, then you probably won't be able to exploit whatever opportunities exist further down the line.

 

Having said all that, the Predictor's recommendation that you investigate futures is, depending on your trading style, probably a good one.

 

Hope that's helpful,

 

BlueHorseshoe

[MightyMouse 12]

You'll go through small accounts trading futures very quickly unless you are very lucky.

No matter how good you are, given the unknowns, there is going to be an element of luck to your trading, because there is an element of luck to everyone's trading. Since you are new, you will likely experience more bad luck than you will good luck as you fumble your way around against traders who have a huge amount more experience than you.

[SIUYA 11]

The problem is if I apply money management to position sizing the number of shares are so small that just covering commissions can take several days. This makes me think I'll need to break some rules and just take my chances.

 

(below is just my personal opinion and a general rant)

It is a good question Bill, and I think one of the most often abused cons in the industry.

 

the percentage returns quoted on accounts.

 

As mentioned, leverage is what most of these things rely on. And leverage can build an account or destroy it quickly.

Most quoted returns quote it off the minimum margin required to fund a position. Well IMHO that is the only industry that tries this con on.

 

Lets put it in a real life scenario.....

Have you ever seen a bank tell you, make 100%s on your money?

Well if you buy a house for 100,000 with 5% down and the market for houses rises to 200,000 (as the past has shown it can) supposedly your account has grown by 20 times.....

 

Hence dont fall into the trap of thinking every one turns small accounts into big ones.....dont get me wrong - it can be done, however you do need luck, big balls and the reality is its more likely not to work. Like many industries you still need money to make money, and using leverage is another tool if you can get that right.

 

Re your options....These only benefit you IF you get lucky and hit a string of winners early......and are effectively the same thing no matter what you do - you are just using more leverage in all cases as the one thing that does not change is the base amount in the account.....and this is the problem you have..

"

1. Increase my risk from 1% to 2% or more.

2. Always buy no less than 100 shares, and just run tight stops.

3. Stop being so cheap and put money I can't afford to lose in the account. "

 

 

There are spread betting and CFD options available to use, whereby you can modify and tailor make your quantities, alternatively you could take the time, build a proper consistent track record and then be prepared to increase the leverage at a later time.....risk it when everything is n your favour....as it can be done.

 

Here is a question for you to ponder......how do people really make money

the top hedge fund managers who return 25% year on year.....did not become billionaries due to the returns on their own money - they did it because they used other peoples money to get more leverage (with little risk).

(a 1mill account compounding at 25% pa, with no withdrawals (you have to live) gets to about 85mill in 20 years....from memory))

Even for other industries......other business owners either use leverage in terms of capital to buy inventory, plant etc,

some leverage other people to do the work and take a clip.

Very few manage to strike it rich with an app they wrote in their back yard....

 

Leverage can help and destroy.....and no matter how you wish to pretend risk is control one way or the other....this is the key (and tough) issue for small accounts.

[kairos 10]

My 2 Cents: As a beginner (less than 2-3 years experience) you should stay as far away from futures as you can especially if you have a small account. I was in the same situation you find yourself in and I decided to go with Mini Forex and started trading 2-3 lots at a time. I focused only on the best setups and started a journal (you also read that in all the books but almost nobody *hint* actually takes the time). My strategy is very simple I take a small profit after a couple of pips and the rest gets set to breakeven, if it turns into a runner great if not you at least have a small profit if you trade one big future contract you will often see your paper profits fade away which is the one thing I cannot stand in trading. If you consistently trade that way your account will grow in no time but you have to forget about that 1% Risk mumbo-jumbo.. If I see a big opportunity I am willing to risk far more than one percent but if the trade goes against me I would never allow it to actually hit my emergency stop.

 

If you decide to stay with equities than don't focus on the money you are actually making. Just focus on steadily growing your account and building a track record. If you made a couple thousand trades and you are clearly profitable you will get a job at a prop firm and they will happily provide you with enough leverage.

 

Good luck!

[alwaysastudent 10]

This makes me think I'll need to break some rules and just take my chances.

 

I could:

1. Increase my risk from 1% to 2% or more.

2. Always buy no less than 100 shares, and just run tight stops.

3. Stop being so cheap and put money I can't afford to lose in the account.

 

Are there any strategies for small accounts? Is there a minimun practicle account size?

I suppose it's really too small for swing trading, but It's going to have to do.

 

I have a small account (anything below 25k is small, the first goal should be the day-trading margin requirement) and feel your pain.

 

1. Small account holders trading stocks will find it near impossible to risk 1% if they want to make a profit and include commissions into the calculation. You are likely looking at closer to 3-5% (possibly upto 10%) risk per trade.

 

2. Tight stops means lowering your win:loss ratio as your trade no longer have the proper room to 'breathe'. I would never ever recommend tight stops for the initial trade entry.

 

Two techniques that can help is to either:

(a) place entry/stops a a lower time frame, i.e. trade the daily set entry/stops in the 15 mins or

(b) scale into the trade. Initial half as it goes your way add half while looking for a solid trend run.

 

I personally use (a) with good results.

 

3. Only you can determine if that is psychologically sound. Would you worry so much that you start meddling ? Lose sleep ? Act rashly ?

 

As other posters commented you can also consider leveraging. Options is the next logical step for most stock traders however my favourite credit spreads forces me to take on 9-10% risk per trade.

 

Two other leverage instruments are Forex and Futures. I have a great love for Futures and do very well paper trading a large account but found it near impossible live trading with a small account. At the lowest you are risking $5/tick. It doesn't take much too blow up your account.

 

Instead I now trade Forex on a mini because it gives me finer control over how much risk I want to take. It allows me to scale from a couple of cents per pip to a few dollars.

 

However Forex and Futures are more day trades in comparison to swing trades. To continue swinging options would be the more appropriate instrument.

[CType 10]

Thanks everyone for your input.

 

Futures and spread betting (I had to look up spread betting). I don't know anything about either of those so that could be a dangerous path to take, but I'll look into them. The leveraging just has so much downside risk. Meaning I could lose more than I have in the account. That I could lose sleep over.

 

I hadn't thought about buying half on entry, with a proper stop, then adding if it move in my favor. This I will try.

 

Overall it looks like I'm just going to have to add more to it. To limit the anxiety I'll pull the plug if I lose my initial amount.

 

I knew there wasn't going to be an easy answer. Thank you for not throwing me off the bridge for my lack of education.

 

Bill