Think Like A Trader Blog

Monday, 18 April 2016

How Starting With A Small Trading Account Can Actually Benefit You

Reading Time - 4 Minutes

A lot of people seem put out by having to start trading with a small account. They contact me and ask how best to proceed and if they should increase their risk until they grow the account.

Now this may seem hard to believe, but starting with a small account is a much better way to begin as a trader than slapping down thousands of pounds and jumping in like Dirty Harry with all guns blazing.

I should note that this also has to be taken sensibly - If you have £1,000 to your name and that is the entirety of your savings and you need it for a family holiday later in the year, then even putting down that amount as a small account is a terrible idea. Trading money should always be money you can afford to lose, certainly until you become consistent.

So how is starting with a small account going to work in your favour?

Quite simply, it allows you to make the mistakes that all beginners make. There is no way you can learn anything new without making mistakes. They happen. You’re human (I think?) and shouldn’t beat yourself up over them. That is a LOT easier if you’re losing £10 or £20 in a trade, rather than £500 or £1000. Emotional trading is like a magnet – it attracts more of the same. And it all stems from the fear and hatred of losing money. You need to build discipline BEFORE coming face to face with it.

A small account lets you focus on your trading plan and learn how to follow it to the letter. It doesn’t matter so much if you win or lose trades when you’re winning and losing small amounts. That leaves you open to focus on what is important – doing it properly. And as that small account grows, you’re growing as a trader with it, bringing along all of the attributes required to trade well.

The broken record that is me advises you to start small, give yourself time and focus on getting it right. The rest falls into place as you go.

I hope you all have a great trading week!

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