When you first encounter the excitement of the Foreign Exchange market, you will notice that there are so many things going on all at once. You may find yourself wanting to try most (or all) of the things at once, which may be challenging. This is why it is quite important to keep your eyes on the prize and create a solid trading plan beforehand.
Particularly, if you decide to start small, or you rather don’t have any other option - do not get discouraged! There are so many new and exciting opportunities on the market today, most of which you haven’t even thought of yet. That’s what’s so great about the Forex market in general - it is welcoming to all types of traders, with big or small accounts.
Patience is Key
Having a lot of patience is a virtue, but also a skill that you acquire through tough times and challenges. You may find them on the market as well, and that could be your opportunity for growth and accomplishment. With trading, there are so many unexpected and unpredictable things to focus on… But ultimately, it is not useful at all. Since things on the market change so fast, there is simply no way to tell what will happen next.
So, what’s left then? Much like in life, on the market, you should focus on yourself. And that primarily means - give yourself time. Allow yourself to make mistakes and learn from them, rather than be harsh towards yourself and quit altogether. In other words, each failure is an opportunity to become and learn something more.
A Downside to Being Patient
Still, we have to admit remind you that there are two sides to every coin. So, as an infamous award for your patience, you may miss an amazing opportunity for trading. Especially when it comes to smaller accounts - these opportunities to earn profit don’t come as often!
That’s why it is important to rely on yourself and your instincts. Yes, you can always watch and learn what other, more experienced traders are doing, but that can only get you so far. At the end of the day, all you can really rely on is yourself.
Another great advantage of having so many options among the trading platforms is the fact that they are constantly competing for our attention and our trust. Therefore, they aim to give us bonuses and discounts, smaller fees, no commissions, better spreads… you name it.
One huge advantage with these platforms is the opportunity to use a demo account - completely free of charge. With it, you can safely play around on the market and try different things that might seem crazy otherwise. Think of it like playing a video game - nothing is off limits!
Create a Strategy, and Stick to it
No matter how much money are you planning to invest, you should always create a trading strategy beforehand. When you’re buying a phone, for example, you don’t just go into the store and take the first one that is the closest to the counter, right?
Of course not! So, what do you do instead? First, you educate yourself on the topic (ie phones). What are their features and characteristics? What about the brands, and the prices? And don’t even get me started on the battery life!
You get the idea. A successful trading journey requires a successful strategy. And for a successful strategy, there isn’t a particular formula to follow. You just need to listen to yourself, manage your instincts, and plan accordingly.
The Benefits of Trading with a Small Account
You might don’t notice it at first, but there are actually a lot more advantages to trading with smaller amounts of money. The first thing that comes to mind is that you can find many ways to play around with the leverage and use it to your advantage. For example, if you choose to trade with a certain stock, you will have around 25-30% of the trade’s value in cash that you will have to give in. But here is the catch - if you trade the same asset under an option or even a warrants market, you will only need about 15-20% of the same value!
Keep it Modest
Especially for first-timers, it is quite easy to get carried away and spend a lot of cash on the trades that might not end up as profitable as you expected. So, having a small account can be quite beneficial here - it can help you keep your funds in check and not spend more than you are prepared to lose.
1% Risk Rule
A 1% risk rule is one of the handiest catches that you can use to your advantage when you trade small. Namely, the 1% risk rule is applied to accounts regardless of the number of funds. However, with smaller accounts, 1% is much greater. So, there you go - you have a much bigger safety net to protect you from unnecessary losses.
What About the Downsides?
Of course, nothing is as perfect as it seems, so it is only natural that there are some downsides with trading small. Aside from the obvious, such as many fewer opportunities for trading, there is also one key fact to remember. And that is - the less money you have, the more likely you are to lose big.
It’s a paradox, really, but think about it - if you have $100.000 and you lose $1000 - you still have plenty left. However, if you only have around $1.500 and you lose the same amount… well, you get the idea.
With a smaller amount of money at your disposal, you also have fewer opportunities when it comes to the global market landscape. To put it simply - some markets require bigger deposits and other fees, which many traders with small accounts simply can’t afford.
And of course, let’s not forget about the pressures you put on yourself as an individual. In other words, each one of us sets certain goals before trading, and we hope at achieving them. With a small account, there is not a lot of room for mistakes. Every hit is a major blow, and you may not be able to take more than one of those sometimes. And before you know it, the window of opportunity is closed forever.
Regardless of what your trading goals are, we all got to start somewhere, right? So if you find yourself just starting out and trading with a small account, you shouldn’t stress about it! With hard work and a lot of patience and dedication, you too can become a high roller in no time. Just keep your head it the game and don’t give up! The good thing about trading today is that there are so many opportunities available, so there is a pretty good chance of achieving greatness even if you’re starting small.