Why trading small accounts is not worth it

Beginner Questions Trading Psychology
1

TRADING SMALL ACCOUNTS IS VERY STRESSFUL AND NOT WORTH IT
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From a personal experience, I don’t advice trading small accounts and here is my story.
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I have traded small accounts for almost a year and I managed to win big time. I traded small accounts between $100 and $300 and I did really good BUT there was a big amount of stress, unmanaged emotions, sleepless nights, becoming greedy, couldn’t take my eyes off the screen, etc. because I could just blow up my account with one single and simple mistake and I did blow up my accounts many times. I was able to double my account in one single day, but also blow up everything in one single day too.
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Trading small accounts differ from trading big accounts in the amount of risk we take.

  1. When trading a $300 we could take a risk of $100 in one single trade but this risk is 33.3% of our account. Imagine risking $1000 of a $3000 account. I’ve share a video on my YouTube channel about percentage trading.
  2. Besides, when trading small account we don’t have room to diversify. You could have a risk between 5 to 10% on one single trade. So for example if we lose 10% we need to win 11.1% to recover our loss.

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One last thing related to the trading plan. We already know that a trading plan that works on a $3,000 account, also works on a $10,000, $20,000, $50,000 account. In the trading plan, we can diversify, manage risk, manage emotions, etc.
Now a TRADING PLAN that works on a 300$ can also work on a $10,000, $20,000, $50,000 account, but with lot of pressure, lot of emotions, too much risk, no room for diversificatio,n, lot of leverage is used, etc. So in this case we you manage to increase the $300 to $3,000 you have to switch to another trading plan.

So a trading plan that works on big accounts can not work on small account (because it is not possible, no room for risk management, not possible to diversify, etc.) and a trading plan that works on small accounts can not work on big accounts (because too much pressure, lot of leverage is used, etc.)

For me the trading plan that I prefer from this experience that I had is the one that works on bigger accounts. I trade the one that works for small accounts but for me it was very stressful on the long run.
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Maybe there are people who enjoy trading small accounts and they are making lot of money. Personal I would not advice trading small accounts. Instead trade a big account in the proper way, will make us a decent income without all the stress.
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In the end. I came up to a conclusion that everything has a price. it is up to us to decide which is more important. Health, family, peace with a steady and decent income or just making bunch of money just to make money.
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Word of advice. Let’s stay humble and enjoy life
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Feel free to share your thoughts guys. I really appreciate it

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2

It is never possible to make a profit by trading emotions. However, if money management and risk rewards are not used properly, there can be many problems. And it is very difficult to make a consistent profit without a deposit. Discipline must be maintained in every case.

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3

Yeah, I agree. Ideally a beginning capital, providing you’re a profitable trader, should be in the region of at least $1000 with a set up keeping risk at no more than 2%.

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4

I would disagree. Just because you exercised poor money / risk management and made it stressful for yourself doesn’t mean it is not worth trading £300 accounts. With microlots you have no reason to risk 33% of your account on a trade.

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Hey @NicksFX thanks for sharing your thought.
Just out of curiosity, have your traded small accounts? And if so, for how long?

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@Kathlyn_Pollich totally true, we need to find the best starting account that will help us manage the risk and keep emotion under control, let us not forget the importance of diversify because trading small accounts with micro lot size will not give us room to diversify since the risk on every trade will be between 5% to 10%, if it is less than this the market will hit the stop loss very easily

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@steve369 I would also recommend a starting capital of not less than 3,000$, it is even much better.

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Nope, I’m on a demo account currently. I ignore the 10k funds and treat it as a micro account which I believe would be possible to trade in the same manner on a live account providing the risk management is maintained.

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9

Well, with trading you have to factor in compound interest as well as the percentage loss when a trade doesn’t go your way, the more trades you lose the more you exponentially you have to win.

Say you have a £300 account, let’s say you trade 2% per trade which would leave you at a loss of £6 if price hits S/L and depending on the pair you could gain up to £12 (I think). You would have to be at the screen all the time making a lot of trades, high exposure with potential to lose all of them.

You sometimes have to think is it worth it? In my opinion it really depends on your attitude to trading, are you wanting to make a comfortable living or do you trade as a hobby. Nobody can really tell you how and what volumes to trade, so if you are comfortable with smaller accounts go ahead. In the end, if you can make the pips at the end of the month, year ect then you’re a profitable trader.

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@KianMcGrath thanks for sharing your thoughts. I do know there are lot of traders who prefers trading small accounts, and I was one of them and I did so good in terms of money. But on the long run I couldn’t take it anymore on the psychological part. Again I repeat, trading small accounts on the long run is very stressful. That is why i switched back to trading my big account, in which I can diversify, manage way better my risk since I have so much room to diversify, mange my emotions also way better, etc.

One last thing related to the trading plan. We already know that a trading plan that works on a $3,000 account, also works on a $10,000, $20,000, $50,000 account. In the trading plan, we can diversify, manage risk, manage emotions, etc.
Now a TRADING PLAN that works on a 300$ can also work on a $10,000, $20,000, $50,000 account, but with lot of pressure, lot of emotions, too much risk, no room for diversificatio,n, lot of leverage is used, etc. So in this case we you manage to increase the $300 to $3,000 you have to switch to another trading plan.

So a trading plan that works on big accounts can not work on small account (because it is not possible, no room for risk management, not possible to diversify, etc.) and a trading plan that works on small accounts can not work on big accounts (because too much pressure, lot of leverage is used, etc.)

For me the trading plan that I prefer from this experience that I had is the one that works on bigger accounts. I trade the one that works for small accounts but for me it was very stressful on the long run.

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11

It depends on what your goals are. If you’re just trying to double or triple it then no, it’s not worth it.

But a small account can be very valuable for practicing with and finding a strategy that works, as long as you treat it like a $10k account and you stick to your rules. If you’re serious about trading and learning to trade you will do this.

I will always advocate practicing with a small account over a demo after you’ve learned the basics.

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@MattyMoney thanks for sharing your thoughts,
A question, from your experience and your point of view, how much do you consider a small account that you can apply your trading plan and that actually will work on bigger account? for example, can you test a trading plan on $300 account that will work on a $10,000 account with a leverage of 50:1 ?

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It’s depend on someone’s character to trade and if it’s doesn’t work for you my be good for anybody else

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14

I rejected conventional wisdom of “trading demo until I’m profitable” for my own reasons. Instead, I’ve traded a small account ($500 starting balance) for about 7 months total, and 3 on my current broker and have learned a lot in doing so.

From Aug to Oct, 2 out of my every 3-4 trades on average were losers, but I protected ~88% of my capital even with imperfect risk management practices and execution. I learned over time that micro lots aren’t good enough for protecting a small account properly. The imbalance between net pips and P/L to date reflects this learning process. Supporting data is available on my public forexfactory profile, see my trade explorer. Same username.

Managing a small account ought to be no different than managing a large one. To scale properly, I think anyone trading a small account should consider a broker that supports custom or nano lots to maximize trade opportunities without taking on excess risk. Furthermore, I do not experience any of the stresses you describe (e.g., I can set and forget my trades, sleep just fine at night, don’t spend huge amounts of time staring at charts, etc.)

Acknowledge that “worth it” has completely different criteria than “possible.” That depends on your goals.

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15

I have been trading in the demo account for 12 days. And I managed to make 500 USD into 6000 USD within just 12 days. 4 minus trades out of 150 trades. I am challenging to make this 500 USD into 100000 USD within two months. I suppose I will make it before two months. The leverage is 1:200.
I was testing with my own strategy and try to perfect it day by day. The aim of my challenge is to be confident with my own strategy.

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17

Well, you would obviously need to decrease your position sizes. However, some brokers won’t let you trade with less than 1000 units, which would limit you. But some brokers (OANDA) will let you trade with as little as 1 unit.

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@lneely great comment ! if brokers allow to trade nano lots size, it is possible to manage risk way better on small accounts. A quick question, since you already have a trading plan that works on small account in which you are able to use nano lot size that will allow you to diversify and manage risk better, do you consider switching from trading small account to big account ? (I mean since the trading plan is actually working great for you on small account)

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The most important thing is feeling the market.

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Sure. I started trading between 0.1 and 0.5 at first. But now I trade with 5 lots. My plan is to make 100% profit every week. For example, I had 2000 USD in my demo account. And my aim was to make it 4000 USD. So I diveded 2000 into 5. Daily profit must be minimum 400 USD. But I made more than that. I made 6000 USD.
Aim: 100000 USD
Then real account.

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@MattyMoney Totally True Oanda allow us to trade 1 unit but of course on certain tradable instrument like currency pairs, but not CFDs.
So, so far I can tell we have two scenarios on trading small accounts.

  1. Scenario 1 : trading small accounts, with a broker that allow us to trade with less than 1,000 units lot size but without lot of leverage, using a certain trading plan in which we will be able manage the risk, diversify, etc. The purpose is to test a trading plan on live small account in order to switch to bigger account if the plan works
  2. Scenario 2 : trading small accounts, with a broker that allow us to trade with at least 1,000 units lot size but with more leverage, using a certain trading plan in which we will not be able to manage the risk, or to diversify, etc. The purpose is to trade live small accounts in the hope of increasing dramatically our account and once we’ve increased it to a certain level we can switch to another trading plan.
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