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10 Simple Ways To Grow A Small Trading Account

It’s easy in theory but actually you need to know this

Since Covid-19 many people, including myself, got hooked on trading stocks. We had nothing to do, it was either that or make babies, I actually did both in that time. Was I successful? Well, I did make a baby and I also grew a £5000 account in to £10,000. The market was easy to trade back then, buy something and it goes up. Today it’s completely the opposite, buy something and it goes down. The transition period caused me some pretty great losses which lead me to learning about trading, today I am consistently profitable and I have a few tips for you to get to the same place.

1. Take your losses like a champ

It sounds easy, but it isn’t, maybe I should change the blog title! This is number one because it is so important. It ruins the order slightly but if this is the only thing you read here then I did my job helping you. The problem is, and we all do it, we let our losses run and then they come back in our favor, we book a profit, then it happens again and again. We think we won each time but we didn’t, we just got lucky. What we just did there is we set the ground for an account blowing up trade. You get lucky a few times and the one time it doesn’t you lose big and big losses are really hard to come back from. They hurt like real pain. You just have to take your losses. Plan out your trade before you enter, if the stock doesn’t follow the plan exit the trade, right away. It’s just one trade, move on. It’s better to lose small than lose big.

2. Read everything you can

Audio books, physical books, blogs and YouTube. Cram as much as you can. Obviously you need an underpinning knowledge of the markets for anything to make sense, start off with the basics on YouTube, what candle sticks mean, VWAP and volume charts. From there read as much as you can. These are the books that have helped me the most;

A Complete Guide To Volume Price Analysis: Anna Coulling – Buy on Amazon £17.57

Technical Analysis Using Multiple Time frames: Brain Shannon – Buy on Amazon £65.67

Market Wizards: Interviews with Top Traders: Jack Schwager – Buy on Amazon £15.95

One Good Trade: Mike Bellafiore – Buy on Amazon £38.47

Trading in the Zone: Mark Douglas – Buy on Amazon £26.98

3. Have an edge in the market

You hear people talking about a “Trading Edge” all the time, what they mean here is you need a plan as to what and when you should trade to get you a profit or an affordable loss. Once you have read the books above you should have an idea of what a chart should be looking like when it is going up or down. As long as you “hit the trade” (exit the trade, take your loss or just get out) when the price action isn’t doing what you expected it to do and take your profits at the right places you have an edge. You have to ensure that your edge gives you at least a 3 to 1 profit margin, obviously higher is better but 3 to 1 is a great starting spot. You only need to get 1 trade right in 3 to stay in the game and build on your edge. Make better entries and exits over time with practice and your accuracy will improve. You will start spotting 4 to 1 trades and above the longer you stay in the game but to stay in the game you have to hit your failed stocks instantly.

4. Trade small to practice your edge

You can practice your edge in a trading simulator but at some point you have to cut the umbilical cord and go live. Nothing is quite like trading with live money. You will be overwhelmed with emotions and all of them will drive your impulses to do the wrong thing at first. So practice with small size and get those feels, embrace them but stick to your edge. 50 shares for example on a 3 to 1 play, you stand to lose $5 on the losers and $15 on the winners. The values of these are not important. This is just an exercise to see if your edge actually has edge that you can trade. Trade your edge 20 times and look at your results. The results will tell you everything about your edge. Even if you lose all 20 trades you only stand to lose $100. Consider that $100 in tuition fees.

5. Eat, sleep and breathe trading

Let trading consume your life, don’t be addicted to trading but be addicted to growing as a trader. Study every trade you make, even the horrible ones. Look back over the charts as often as you can. Watch other people trading live on YouTube. My best advice is use a trading simulator replay tool at least once a day. It helps you build up that emotionless trader style that you need to have, it helps fine tune your edge and it helps getting you warm to the markets before the open. Sometimes I will trade a random day on the replay tool before the open and I know instantly whether or not I am in the zone. If I choke, I just don’t trade. It is much better to lose imaginary money than real money.

I use the trading simulator at Bear Bull Traders – https://stocktradingsimulator.com/

It’s completely free.

6. Set realistic goals

Trying to hit home runs isn’t it at the start. They are super appealing, you see a stock moon up $2 in split moment, pull back a little and rip up another $1 just as quickly. When you first start trading stay away from these stocks, they will punish you. You look at them and imagine what you could have won there but just don’t do it. With a small account of $500 to $2000 you need to be looking for an average of $50 a day of profit trading your edge. Some days you will get more, some days you will lose but if you maintain a $50/day average you are doing great and you have something to build on. Have a daily loss of $30. You have to stop if you hit a day total loss of $30, trade in the sim or just do something else. You can not lose more than your daily average.

7. Build up to the big size

You start off small, winning $50/day, but we both know that this amount isn’t the end game so eventually we have to size up. This is the model I use on a small account starting with $500 and the amounts of shares I traded per trade using a 3 to 1 edge.

Account size $500 – $1000 (Trade up to 50 shares)
Account size $1000 – $1500 (Trade up to 100 shares)
Account size $1500 – $2500 (Trade up to 250 shares)
Account size $2500 – $5000 (Trade up to 500 shares)
Account size $5000 – $25,000 (Trade up to 1000 shares)

By the time we get to trading 1000 share positions we are looking at our losing trades being around $100 and our winners being $300. These are workable numbers but once you are here and you have actually grown your account this far, you are a consistently profitable trader and you will find that when you take your max share position it is because you are as certain as you will ever be that the trade will work and 9 times out 10 it’s going to be a bigger bounty than $300.

This model worked well for me. If you fall below a threshold number you have to down size to save your losses mounting and when you move up it is a really nice reward as you watch your account grow faster doing the exact same thing you have always done.

8. Risk less when it seems risky

Sometimes we think we see something in the market that doesn’t quite fit our strategy. A stock looks like it’s dropped far enough but yet the buying volume doesn’t come in and the sellers seem aggressive  still so we take a short position because we feel it still has some room to the downside.

You think you’re right and you might be right but the door is definitely open to being very wrong so if you take the trade then risk less. You have to consider this as practicing a new edge, it isn’t in your wheel house. If it works out consider scanning for this trade and testing it as new play.

9. Take some profits when it surges

Whether you’re short or long and the stock goes in your favour in one single large surge of volume take some profit off the table. The chances are after the surge is done the stock will reverse to some degree. Depending on your playbook and the volume profile of the pull in/pull up you can always add those shares back to the position until you hit your target. Just always take some off on the surges.

10. My suggested stocks to trade

Stay away from anything with a float of less than 20 million. They move fast in both directions. These stocks are for gamblers and traders with experience of micro floats. Mastering micro floats takes time and super fast hands to move in and out of trades quickly. By all means watch them do their thing but stay off them until you know what you are doing with them. These things can blow you up before you even know what happened.

For me, I like stocks that trade in a price region of $5 – $40, float sizes of 40 million and upwards, ATR (average true range, low to high in one day) of around $2. The volume has to be over 5 million per day or it has to be very active in the pre market with higher than normal volume.

My regular stocks to trade are;

AFRM, NIO, AMC, PTON, SOXL, TWTR

These 6 I keep on my watchlist to see their premarket action. They tend to be volatile most days and have plenty of movement one way or the other for places to make good trades. Stocks that show a direction and just stay with it for the first half of the day are the best traders.

Don’t be scared of going short, especially in this 2022 market.

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