3 Tips For Small Account Traders

by | May 6, 2020

I’ve been getting bombarded with questions about my journey from a broke college graduate to a 7-figure trader… and in an attempt to help as many people out as possible, I came up with 3 tips that I wish I knew when I first started out trading.

You see, when I first stepped into the trading area — I put $15K into a trading account with money I saved up from birthdays, working as a security guard in college, and an analyst at a real estate firm.

Of course, when I was in my early 20s… that seemed like a lot of money — but in the trading world, $15K would be considered chump change. Heck, I couldn’t really day trade with that small account. 

But the thing is, I realized I didn’t necessarily have to trade every day to make money in the market (one of the tips I wish I knew before I lost about half of my account when I first started out).

When it comes to small accounts, I believe trading every day can actually be more hurtful than helpful.

You see, if you actually day trade (buy and sell the same stocks or options the same day, 5 times a week)… you run the risk of being locked out of your account. It’s what’s known as the pattern day trader (PDT) rule.

Not only that but if you’re not profitable… your account can dwindle very quickly, as I found out when I first started trading.

So what was my solution?

 

Only Trade My Best Setups

 

When I realized I was overtrading with my $15K account early in my career, I went back to the drawing board and only focused on my best setups— the ones I found to be profitable.

In other words, I was extremely selective and only traded setups in which I believed to have a high probability of success. Once I did that, I started to turn the corner and become a profitable trade.

To this day, I only focus on my bread-and-butter setups

Now, I know how hard it can be for small-account traders to select the “best” trading setup… so I came up with a strategy that I believe can benefit this type of trader.

Basically, I come up with just one trade idea a week — my highest conviction trade idea of the week.  The goal is to generate double-digit percentage returns (or more) in 5 days or less. It’s something I wish I had when I first started trading.

Now, this actually ties in with my second tip for small-account traders… remain disciplined.

 

Remain Disciplined

 

I believe all traders should take a disciplined approach… but it’s even more important for small account traders. The one pitfall I kept committing when I first started trading was style drifting.

Basically, I wasn’t focused on my best setups… I just traded stocks that moved and I didn’t really have a plan. 

I believe the quick solution here is to just trade less and develop a clear cut plan. 

Here’s what I mean by that…

 

 

With my highest-conviction trade idea of the week, I provided Fast 5 Trades with my thesis, as well as an execution plan. Additionally, I let them know about my moves in the stock.

I find when I have a thesis and a plan, I can remain disciplined, and set it and forget it (not really though because I have the luxury of sitting at my desk and following the market). I believe if small account traders focus on just one trade idea a week, it can help them become disciplined.

Last but not least, my last tip for small account traders is to be realistic and risk manage properly.

 

Be Realistic And Risk Manage 

 

I know what it’s like to be a small account trader… and early on in my career, I thought I was going to be an overnight success. I thought I could quickly double my account by just trading stocks.

However, it doesn’t really work like that. Chances are, small account traders aren’t going to become millionaires in just a few weeks or months. It could happen, but it’s unlikely. 

So my tip here is to be realistic and manage expectations. 

Why?

If you set unrealistic expectations, it’s very easy to lose discipline and not manage your risk properly. 

For example, if a trade moves past your stop… I don’t think it would be wise to double down and continue to buy as the stock moves against you. At some time, you’ll hit your pain point and potentially take a massive loss… which could put you out of the game.

So if you have a small account, take it slow at first… stick to your trading plan and only focus on your best setups.

I wish I knew about these tips when I had a small account because I believe I could’ve saved myself from a lot of pain at the start of my career.

 

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