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  • Can You Trade Forex Well with a Small Balance?

    From dailyfx.com

    Talking Points -The Desire to Trade FX with a Small Balance -The Limits of a Small Balance -The Better Path Regardless of Risk “Ninety-five percent of the trading errors you are likely to make—causing the money to just evaporate before your eyes—will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table. What I call the four primary trading fears.” “Attitude produces better total outcomes than analysis or technique.” ― Mark Douglas, Trading in the Zone What’s the least amount I can’t start trading with? That’s a common question running through a ... (full story)

Yes you can, yes you can, yes you caaaaannn!!!!!!
When all conditions are met - Enter trade - sit back and FRET !!!
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What is considered a small balance? 5k USD?
Once one identify his reasons to trade at all - the account size is only a variable.
Quoting jsf
Yes you can, yes you can, yes you caaaaannn!!!!!!
Hey! This is not a musical....

Quoting michaelpelly
Once one identify his reasons to trade at all - the account size is only a variable.
Also very true.
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Quoting michaelpelly
Once one identify his reasons to trade at all - the account size is only a variable.
Yea but an important given the opportunity cost of time. If you spend all the time needed to wait out consolidations (e.g. three or so weeks now in the euro) to realize profit or loss then clearly a small amount or account size is really not on.

The proportionate risk and reward being the same for all even strategies in trading (whether winning or losing strategies - all retail strategies are loss strategies anyway) account size then could reflect as a seriously inefficient application of unit capital employed when below a certain size. The efficient size is something that empirical research (funded by brokers) should indicate but given that most traders are unschooled and therefore mostly unaware of the finer points of the economics of trading and that brokers (from the very active retail rumor mill) are exploitative probably that will not happen.

In this respect this article is misleading and uninformed. The authors are either ignorant of basic finance and theories of the reinvestment rate or have deliberately set out to "bushwhack" more unsophisticated in the herd (almost always 99%). Clearly they are succeeding if that is their intention.

The market is not user friendly! The Crow
When talking about profits its always best to talk in terms of percentage.
I began trading with 300 dollars. I am able to make 20% gains every year on my account, which is what most banks earn per year (20%). Its actually very easy.
Lets do the math:

We have around 20 trading days per month X 12 = 240 days per year.
20% of 300USD = 60.
60 / 240 = .25 cents per day or 5 dollars per month.
I honestly think even a novice can make 5 dollars a month with a mere 300 dollars.

Some people must laugh at this as they might think 20% is nothing.
But I have always wondered how much in percentage terms other traders here are making!!
Quoting Guest
Yea but an important given the opportunity cost of time. If you spend all the time needed to wait out consolidations (e.g. three or so weeks now in the euro) to realize profit or loss then clearly a small amount or account size is really not on.....
that was deep... but let me push the scale even a bit further and pose a far more perplexing question. Can one trade forex well with a demo account?
Quoting Ipxx.xxx1202
that was deep... but let me push the scale even a bit further and pose a far more perplexing question. Can one trade forex well with a demo account?
No.
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Quoting Ipxx.xxx1202
that was deep... but let me push the scale even a bit further and pose a far more perplexing question. Can one trade forex well with a demo account?
Yes I believe it is the best way to define your trading personality before you go pro. But it is usually more effective after you have lost a ton trying to trade cash and now have enough respect for the market to focus on the decisions you are making regardless of the account type you are trading. When you are that sober there is no difference between a demo and cash account because all losses (reflecting that you have not gained the required skill set) are as painful. Demo then (the second time around) is the way to go.

BTW: Could or should take more than two years demo trading (full time) to come to the play ground. Of course this is not from empirical research by experiential. Everyone of course is different.

Going up or down price moves up and down. Market is not user friendly! The crow
Quoting Guest
Yes I believe it is the best way to define your trading personality before you go pro. But it is usually more effective after you have lost a ton trying to trade cash and now have enough respect for the market to focus on the decisions you are making regardless of the account type you are trading. When you are that sober there is no difference between a demo and cash account because all losses (reflecting that you have not gained the required skill set) are as painful. Demo then (the second time around) is the way to go.

BTW: Could or should...
I would agree. It's a serious question that I think touches on the physiological aspects that affect "trading well". As Michaelpelly mentioned that account size is a only a variable within the rules of a trading system. However, it's a variable that can seriously impair a trader's judgement. A demo account or with a small account balance the trader will be more tempted to take on unnecessary risk, whereas fear and timidness could become the culprit when trading with a larger account balance.
A very poorly written article by Tyler Yell. I can't believe that he is actually a university graduate! I wonder how much FXCM is paying him to try and convince people to put more money in their trading accounts?
Warning.

Do not believe the conclusions of this article. If you can't handle the emotional stress of losing $300 of a $1000 account, do you really think that losing $3000 of a $10000 account will somehow be easier? The Lottery Mentality doesn't just disappear if you have a larger account. If you have a fear of having $100 at risk, what will happen to that fear when the amount you have at risk is tenfold greater?

The author (or anyone) could counter and say that what he really meant was that the account balance should be increased but the trade size kept the same. Well,

1. Nowhere in the article does it say that, and
2. The noob trader isn't going to follow that rule anyway.

The graph of winning percentages is misleading, winning percentages mean nothing. Consistently winning traders have a low percentage of winning trades. Here is how the typical noob trades: he will open some positions, and when a position goes into the red he will react emotionally and close it out at a loss. Later he will look at the chart again and notice that if he had just held the trade longer it would have become profitable. So he decides that the way to trade is to hold all positions until they can be closed at a profit. This works pretty well, and he has a very high percentage of winning trades. But sooner or later the market is going to start to trend against one of his open trades, and he will blow out his whole account holding onto losers forever. He takes a high percentage of small winners and a small number of devastating losers. This strategy guarantees that a trader will eventually blow out his account.

Realistically, it takes years of practice to learn how to trade well enough to become consistently profitable. If you can't make trading work for you with a $1000 account, your chances of doing so will not increase by having a larger account. Make your mistakes and learn your lessons on a small account, before you bet the farm.
Sure I have a trading plan. Buy low. Sell high. What's yours?
Quoting RoySaab
When talking about profits its always best to talk in terms of percentage.
I began trading with 300 dollars. I am able to make 20% gains every year on my account, which is what most banks earn per year (20%). Its actually very easy.
Lets do the math:

We have around 20 trading days per month X 12 = 240 days per year.
20% of 300USD = 60.
60 / 240 = .25 cents per day or 5 dollars per month.
I honestly think even a novice can make 5 dollars a month with a mere 300 dollars.

Some people must laugh at this as they might think 20% is nothing.
But...
yes i made 200 usd just from 25 usd how you measure it consider just % not amt concentrate on win %
Say something meaningful or Silence!!
Quoting Trainman
Realistically, it takes years of practice to learn how to trade well enough to become consistently profitable.
I don't think that has to be true. The quesion really is: is one capable of identifying his trading problems or not. If you're capable you can get profitable quite fast, if not, well, then you'll have problems learning anything else, too. Trading really isn't that complicated, it's just that you have to learn a bit about trading and money management (not only risk, though) and a lot about your self and how you react to stress. Most people stop learning after the first one or two out of the three.

Quoting Trainman
If you can't make trading work for you with a $1000 account, your chances of doing so will not increase by having a larger account. Make your mistakes and learn your lessons on a small account, before you bet the farm.
I second that. Loosing a bit of money on a small account is sometimes the fastest way to learn.
Ok, usually I don't read these articles because they all have the same mantra; "you can be successful if you trade like a Pro!" This article is no different. What is this 'agility' thing. Do you think agility is a function of the size of your wallet? Of course not. Agility is merely the ability to be able to react when necessary.

There is one useful line which everybody should take to heart, 'focus on preserving capital'. That will force you to consider all risks.

Quoting Trainman
Warning.....

The author (or anyone) could counter and say that what he really meant was that the account balance should be increased but the trade size kept the same. Well,

1. Nowhere in the article does it say that, and
2. The noob trader isn't going to follow that rule anyway.

...

Realistically, it takes years of practice to learn how to trade well enough to become consistently profitable. If you can't make trading work for you with a $1000 account, your chances of doing so will not increase by having a larger account. Make your mistakes...
That about sums it up. Your account size is irrelevant, how you 'manage' it is everything. Keep your leverage low and don't try to make a million in a week.
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
no
FF = Forex Faggots
The small account is the bread and butter of your friendly neighborood bucket shop.
They make sure to sweeten the deal with a sign on bonus and high leverage.
Result: the small account handed to them within a week...
After all, they have a mortgage to pay..
If you can trade forex then you can trade it irrespective of the balance, whether it be $100 or $10,000, your risk will be proportionate, Start with a demo until you can double your account, then open a micro account. When you can make money with that, you have a winning edge which should, if you use correct money management, take you onward and upward. Begin with a large account before you really know what you are doing, and you will see your money quickly disappear.
In my experience it comes down to one thing leverage, and loss taking, even with a tiny account $250 you can trade it up to $5000. Its hard, you won't do it from scratch, but provided you are patient and kick losses fast it can be done. A bigger account gives you only one advantage, you can risk more and not blow the account. Not risk more as a percentage, but risk more in terms of position. Basically you get paid more to do the same thing.

If you cannot take a $250 account to $5000 then you won't take a $50,000 account to $250,000

If you were a very good trader the maths go like this

$250 hard core risk $25 on a trade (10%) look for a market that moves 90 plus pis a day aim to get about 60-70 of those 90 using a 25 pip stop

trade one wins $60 banked new capital $310, rinse and repeat by trade 70 assuming you have no losses you are at £5010, taking just one well though out trade a day and risking 10%
What worked for me was; Having a good trade plan and sticking to it, Not using a cheap broker, diversifing my trading assets(having more capital), and rewarding myself.
It depends on strategy,
eg. If you want to trade in the week TF with 2K ( 50:1 leverage ), and place half of the available margin in 5 trades on the Daily Range, and stay alive ... well that is ridiculous.
Don't swim with the sharks ...
I think everyone needs to decide things (ie strategy, money management, acceptable profit levels etc) for themselves. If you can make more money with less, (and good traders can), then what others say / think / percieve is immaterial. ie no-one gets into trading to have others dictate what they do.
The answer is an absolute NO.

READ the question Clearly, the headline say:

Can You Trade Forex WELLLLLLLLL with a Small Balance?


... Small account can never grow to big account because of greed.. it's impossible to contain greed. Because everyone who play forex all want to to try to make a BIG income out of it...like A JOB...

In order to achieve the goal of using forex as your MAIN INCOME. then you NEED a BIG balance.. There is NO shortcut... trading small ain't goign to cut it, even if you win little consistently it's NOT WELL because you are clearly not making enough money to feed your family. SO ALL is NOT well.
Yup, when trading forex as one main income, small balance is a fast way to blow the account. All these talk about risk management and psychology are not going to work here 'cos one need to earn a minimum amount to cover the cost of living each month.
It's hard to give a shit with a small account. If loosing doesn't hurt, you won't try to win. Just my experience
Quoting victor_ray
... Small account can never grow to big account because of greed.. it's impossible to contain greed. Because everyone who play forex all want to to try to make a BIG income out of it...like A JOB...
That is the most distorted view I have read in a long time.

Quoting victor_ray
In order to achieve the goal of using forex as your MAIN INCOME. then you NEED a BIG balance.. There is NO shortcut... trading small ain't going to cut it, even if you win little consistently it's NOT WELL because you are clearly not making enough money to feed your family. SO ALL is NOT well.
That part is true. IMHO you need an account with at least a year's pay in it.
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YES
Its not a matter of being able to trade fx with any size balance, its what can you do with a small balance?? You most certainly be making a living with under 50k balance.
All posts are my personal opinion
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I heard Ed Seykota started with $5000 and made $10 million in 10 years! But I don't think he did it by getting in and out of the market every day!
Quoting Guest
I heard Ed Seykota started with $5000 and made $10 million in 10 years! But I don't think he did it by getting in and out of the market every day!
That is achieved by doubling your money, or slightly more, every year. Doubling is not an unrealistic target, maintaining that performance for 10 years is quite an achievement.
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Yes I can!!
look at this one.
http://www.forexfactory.com/showthread.php?p=7440112#post7440112
don't predict direction, but dance with flow of water
If you have everything else right in your life, and are happy, and are extremely (indeed preternaturally) disciplined, and are not doing it with the aim of getting rich, and you already have enough money to be happy, and you don't need the extra money, and you are willing to put in 1000s of necessary hours of study and practice for scant monetary reward, then yes, you might have a chance at trading well on a small account.
But how many people on FF fit that description? One in one thousand, perhaps.
I have no clue what I'm talking about.
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  • Posted: May 6, 2014 2:33am
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    Category: Educational News
    Comments: 33  /  Views: 9,274