Growing a small into a big trading account can be very hard. Most traders who start with a small account will not be able to turn their trading account into a size that allows them to make a substantial amount of money. But why is that? There are a handful of reasons why trading a small account is so hard and knowing what it takes to turn a small trading account into a big one can help you get there (much faster).
Realistic expectations
Wrong expectations are the main reason why traders with a small account don’t make it. It is important to understand that it will take a lot of time to grow a small trading account.
For example, trading with a $250 and risking 3% per trade means that you only make $7.50 on a winning trade with a reward-risk ratio of 1. Usually, those are not the returns traders are hoping for when they want to become professional traders.
Traders with a small account have to understand that making money should not be their main goal. The main goal when trading with a small trading account is to build your character, build a professional trading mindset and improve your strategy step by step. We will soon learn what all that means.
Build a professional mindset
Trading like a professional starts in your head. Being disciplined, following your rules and always seeking to improve your skills and your trading strategy are the cornerstones of professional trading. We at Edgewonk know about the importance of thinking like a professional and that’s the reason why the Edgewonk trading journal comes with a variety of different tools and features that help you along the way.
The Tiltmeter is the most popular psychological tool in Edgewonk because it acts like a personal mentor and shows you exactly how you are performing. A red Tiltmeter means that you have repeatedly broken your rules and made mistakes. A green Tiltmeter shows a disciplined trading approach.
In the 12-week trader development program, the Tiltmeter challenge is the first task we challenge our users with because it is the fastest way to build a strong and more professional trading character. And if you are trading with a small trading account, being disciplined and respecting your rules is of great importance; it lays the foundation to your future trading career.
Improve your trading strategy
Instead of risking more money, improving your current strategy will help you grow your trading account even faster. Edgewonk comes with dozens of tools and features that analyze your trading strategy and then provide actionable tips on how to adjust your parameters to improve your winrate, get greater winners, cut losers and get more profitable trades:
- Stop giving back profits and get bigger winning trades
- Improve trade management and make better in-trade decisions
- Professional position sizing step by step
At Edgewonk, we believe and have seen it first hand by talking to our users that instead of changing your trading strategy all the time you should focus on improving the one you already have. No system will work right from the start, but almost all systems can be turned into a profitable one.
This is what awaits you with a small account
OK, you know that you have to develop a professional trading mindset and improve the trading strategy you have, but what about the money? How much can you really make with a small trading account? The Edgewonk trading journal comes with a risk and performance simulator that lets you simulate your potential future trading performance.
The screenshot below shows a potential account development for a trading account with $250, a winrate of 60% and an average reward-risk ratio of 1.2. Those are relatively conservative statistics but the small trading account grows to a substantial amount of $12,000 – $26,000 on different simulations (the different graphs).
Doesn’t sound too bad to turn $250 into $26,000, right? However, there is a catch. For the first 300 trades, the account barely does anything and it grew very, very slowly. This slow-growth period is the time when most traders throw in the towel, ramp up their risk, look for a different system and deviate from their original plan. 300 trades with very little account growth can be hard to deal with and most traders will never get to the right side of the performance simulation.
Add to your account
Once you have proven that you can trade profitably for a period of time, you can think about adding to your trading account. And even if it is only $50 per month, it will help your account growth significantly. Turning a small into a big trading account is a hard and very tough grind. Traders need perseverance, passion and a desire to make it.
Here is our checklist that will help you grow a small into a bigger trading account:
- Realistic expectations. Be prepared to not make (a lot of) money for a long time
- Developing discipline and a professional character is the number one priority
- Improve your trading system steadily instead of jumping from one method to the next
- After you have proven to yourself that you can trade profitably, think about adding to your trading account
- Accept that trading a small trading account is a long and hard task
- Enjoy the process and develop a passion for trading to fuel your endeavor
If you are looking for help on your journey, take a look at our 12-week program where we help you understand the Edgewonk trading journal and walk you through the process of becoming a better trader.