(can) small accounts make a living ?! | Page 7 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Do you make a living trading small timeframes? 58 replies

Living in China, trading for a living 18 replies

Can Americans living abroad open accounts with non-US brokers? 11 replies

How can I make a living trading forex? 25 replies

Reality check - do small FX accounts inevitably stay small? 14 replies

Attachments: (can) small accounts make a living ?!
Exit Attachments

(can) small accounts make a living ?!

  • #121
  • Edited 6:11pm Mar 3, 2009 1:45pm | Edited 6:11pm
Hi Rearden,

Thanks for this interesting and informative thread. I actually don't post on threads as I've never felt the need to. However with your thread I simply could not resist.

I have been trading the markets for a while now and have not had much success in the beginning. I think the lack of MM and a solid trading plan led to my downfall.

However I never lost interest and really have a passion for the markets. I am a chemical engineer by trade and have found this to be a huge problem with my trading in the beginning. Being good at maths and technical analysis, I thought I could make sense of the charts and really went overboard when it came to my analysis of the markets. This only complicated things more.

I have found over the years that no one knows what price will do next. Some indicators or fundamentals can assist in giving us a view of what to expect from the market. However nothing is cast in stone or 100% guaranteed. The only view that counts is yours. I now trade without the hundreds of signals on my charts and use much longer time frames to make sense of the charts. I trade price and not the signals. My biggest lesson was in MM and dealing with a trade that goes against you. I found that once I mastered these it all came good. I also don't set myself monthly or annual goals. I have accepted the fact that one can only take what the market offers. As soon as you want to take more you can end up loosing your shirt.

Like all traders I have my personal goals for my trading account. I don't want to be the next billionaire. Just a profitable account that can replace my need for 9-to-5 job. I keep it simple. If I make 100% this month. Good. And only 10% next month. Still good.

Happy trading all.
  • #122
  • Mar 3, 2009 3:56pm Mar 3, 2009 3:56pm
Surely the question to ask here is :-


Can anyone make money long term consistently ??

If YES then, ofcourse given compounding then ofcourse you can make a living outta a small account.

The problem is the above question!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #123
  • Mar 3, 2009 4:12pm Mar 3, 2009 4:12pm
Quoting Turveyd
Surely the question to ask here is :-


Can anyone make money long term consistently ??

If YES then, ofcourse given compounding then ofcourse you can make a living outta a small account.

The problem is the above question!!
If you are far enough up the information Ladder then the answer is yes without a doubt, as long as you have measures in-place for If your information becomes useless, and can then seek out a new edge.

The question alot of people need to ask is, why should I expect people to push prices further after me? If you dont have an answer to this then there is something missing.
Living the adventure in my head.
  • #124
  • Mar 3, 2009 6:45pm Mar 3, 2009 6:45pm
Quoting Turveyd
Surely the question to ask here is :-


Can anyone make money long term consistently ??

If YES then, ofcourse given compounding then ofcourse you can make a living outta a small account.

The problem is the above question!!
I think the above question, coupled with another point, is the key. The other point being managing expectations (psychology). When one starts out in any venture, it is at the start when the expectations are the greatest (and usually the most unrealistic). As time goes by, and we become more aware of the market/the playing field, our expectations, and emotional reactions to the results adapt. The best way for me to describe this is by using numbers:

A small account : $500.

lets say you have a wizbang system that allows you to get a return of 1% everyday. This would assume the fact that you as a trader have managed to get over the hurdle of becoming and maintining discipline. Whether it takes 1 hr of trading or 6 hours of trading, your MM allows u to achieve 1% per day. We know that with proper compounding, that $500 can become a SUBSTANTIAL amount in 2 yrs (haven't got access to excel to give the exact number). An amt that will allow you to live very very comfortably, but more importantly, allow you to do what you want with your life.

The catch is this: after the first day's worth of trading, you have made a wopping $5. Next day, $5.50. After a week's worth of trading, you haven't made much more than $25.50. http://www.forexfactory.com/images/icons/icon9.gif At this stage, how many traders will see the $25.50, and how many will see 5.1%. This lone point can determine the change in mindset from being disciplined to being undisciplined.

Is it possible to take a small account to a big account - absolutely

Has the trader got the discipline to see the big picture, 1-2 yrs from now - maybe!!

Cheers,
K.
  • #125
  • Mar 3, 2009 7:09pm Mar 3, 2009 7:09pm
I think it can be done.
I started a few 'small' accounts back in Oct '08. This one was started with $300. I was able to catch a nice wave, turn it into around $1200. Took around $600 out. Then rode it up to around $1000 again, took another $500 out. Now, I'm letting all the profits sit and grow the account as I have paid for all of the 'small' accounts.


Here is it's current equity curve since the beginning of this year.
This account was basically a challenge to do this 'exact' thing. So far, so good. If you have a good system/method - you'll succeed.
Attached Image (click to enlarge)
Click to Enlarge Name: DetailedStatement.gif Size: 5 KB
  • #126
  • Mar 4, 2009 1:15am Mar 4, 2009 1:15am
I agree. I believe that the key word of successfull trading is confidence: once you have confidence in your system, your personal trading style, everything else grows from that: be able to wait for good trades, and let them run, and also be able to analyse objectively, spot bad trades and exit from them early enough.

I do not know if this next graph is of any good, but I'll put it here anyway to show that it is possible to trade in a low risk and profitable manner. The graph is my son's demo account, from last 5-6 weeks. He mostly trades euro, with small risk, typically 1% per trade. He started with indicators, played them for a while, and finally gave up using them. He, like me, now uses ew and fibs and plans to start live trading soon. So hang in there, folks, it is possible.

R

Quoting dwildes
I think it can be done...
Attached Image (click to enlarge)
Click to Enlarge Name: DetailedStatement.gif Size: 5 KB
  • #127
  • Mar 4, 2009 3:35am Mar 4, 2009 3:35am
Good morning all,

We start shortly.

First of all, thank you for all the informative replies and exchange of thoughts. Becuse of what I read, my next point will cover risk-tolerance.

That goes hand-in-hand with the associated psychological pressure of putting more money on the line. In other businesses that would relate to investment and expansion - buying more stock without the certainty of demand.

Coffee first though.

H. Rearden
  • #128
  • Mar 4, 2009 4:35am Mar 4, 2009 4:35am
Ok, here we go -

I don't think it would be necessary to discuss in too much detail the differences or the pro's and con's of demo trading.

My own opinion goes as far as to say that demo's are a good way of testing strategies - that does not take into account the mental factors which come with each different strategy.

Before going to take any amount of real money and start trading, I would always recommend to 'test' the approach you intend to use - that means YOU test it over a sufficient period of time (which is individually different depending on the average holding period of it's average trade). You should NEVER rely on the so called test results of other peoples method's/systems/grails - not because they might not work, but because your trading mindset might be different to the person whose 'invention' you are trying to replicate.

Be sure to test for the worst possible downside - since any promised upside is irrelevant for the simple reason that nobody can actually make an accurate forecast of how profitable a method is going to be in the future. We all have to rely on estimates there. But you can always determine yourself precisely what the worst case scenario will be at any time. Remember what I said yesterday about control - you have to control the risk at any time. The heart of the matter really is to weigh up the PROBABILITY of the upside versus the CERTAINTY of the downside during a large enough time span and find whether the positive can possibly outweigh the negative.

Let that sink in for a moment.

Back soon.

H. Rearden
  • #129
  • Mar 4, 2009 5:06am Mar 4, 2009 5:06am
be able to wait for good trades, and let them run, and also be able to analyse objectively, spot bad trades and exit from them early enough.


enough said
  • #130
  • Mar 4, 2009 5:06am Mar 4, 2009 5:06am
sorry that was meant to be quoting rocroy
  • #131
  • Mar 4, 2009 5:25am Mar 4, 2009 5:25am
also note how H REARDON has put in capitals PROBABILITY!!!! between probability and what rocroy has outlined, if you base a system off these principles then you should go close to being on track. if you do that then it is only your mental state and discipline that will determine your outcome.

for an amusing take of all this do a search for the "whipsaw song by ed seykota" ( one of the original market wizards ) on youtube. although it is a fun kind of ditty, he is delivering a serious message of what has made him successful.
  • #132
  • Mar 4, 2009 6:08am Mar 4, 2009 6:08am
Since Zorros mentioned it:

Some of the more informative as well as entertaining books frequently listed on trading forums:

Reminiscences of a Stock Operator by Edwin Lefevre

Market Wizards I + II by Jack Schwager

Some of Van Tharpe's books (partly overrated in my view)

My personal favourite: Atlas Shrugged by Ayn Rand (not a trading book as such, but a great take on human identity)

H. Rearden
  • #133
  • Edited 6:56am Mar 4, 2009 6:53am | Edited 6:56am
Back again.

Now to risk-tolerance.

Two concepts are closely linked which have an undeniable effect on the ability of a trader to act in a objective manner:

Position size and the notion of compounding.

Both are interdependent (if used together), and both increase the psychological pressure on the trader.

I usually have a risk limitation of 2% per trade (of the initial capital) in place, with a further limit of max. 4% per day. For example, if I have 2 losing trades which have both hit their limit of 2%, I will not carry on that day - regardless of what the opportunity might look like. (most of my trades move 1% on average against me, which means I am not under pressure to reach specific targets in just 2 trades per day)

Regardless of the mechanics of your own riks-management, I can tell you that on average the fear and pressure when increasing the amount of real money on your trades, will increase as well - dramatically in many if not in most cases. Just ask yourself if you are in a trade that has a 50pence/pip value and you are close to losing your 2% (for example) - then ask yourself in turn if you have a £50/pip trade on and it is just 10 pips in profit - what to do next while the cash register is ringing?

What happens to most with increased value on a single trade, the fear of losing what looks like a handsome amount of money at this very moment in time takes over your otherwise rational thinking - which should tell you that it is only relative to your account balance. The trade is simply taken out of context by blind-vision to the surrounding circumstances.

Of course, this does not happen to everyone - but it is extremely common in the beginning trader.

A little break to reflect.

H. Rearden
  • #134
  • Mar 4, 2009 7:00am Mar 4, 2009 7:00am
Quoting Rocroy
I do not know if this next graph is of any good, but I'll put it here anyway to show that it is possible to trade in a low risk and profitable manner. The graph is my son's demo account, from last 5-6 weeks. He mostly trades euro, with small risk, typically 1% per trade. He started with indicators, played them for a while, and finally gave up using them. He, like me, now uses ew and fibs and plans to start live trading soon. So hang in there, folks, it is possible.

R
Looks pretty good to me!
It appears he's made about 50% this month - why not throw in about $500 in a live account? Let him start learning the difference when real cash is on the line and all those fun emotions that occur until he gets dull to it.
  • #135
  • Mar 4, 2009 7:07am Mar 4, 2009 7:07am
Hello to all, I hope someone can help me out.To be honest,at this moment in time i do not have the bankroll to invest as i should to maintain any sort of decent income but the thing i do have is a very high strike rate, i would say running at 90%+ and making pips from 5-50.Without mentioning words like martingale, anti martingale or compounding lol what would be a decent way to trade taking into account i use small bankroll and when i do have a loss my next few trades might not recover the loss, happy days to all
SEE LINE,TRADE LINE..PRICE HAS TO GO SOMEWHERE,,, PRICE WILL GO SOMEWHERE.
  • #136
  • Mar 4, 2009 7:13am Mar 4, 2009 7:13am
Quoting H. Rearden
Since Zorros mentioned it:

My personal favourite: Atlas Shrugged by Ayn Rand (not a trading book as such, but a great take on human identity)

H. Rearden
Fountainhead too ...
To Live is the rarest thing in the world , Most people exist , that is all
  • #137
  • Mar 4, 2009 7:21am Mar 4, 2009 7:21am
Quoting billytt
Hello to all, I hope someone can help me out.To be honest,at this moment in time i do not have the bankroll to invest as i should to maintain any sort of decent income but the thing i do have is a very high strike rate, i would say running at 90%+ and making pips from 5-50.Without mentioning words like martingale, anti martingale or compounding lol what would be a decent way to trade taking into account i use small bankroll and when i do have a loss my next few trades might not recover the loss, happy days to all

Take a step back and find a way to trade where one loss shouldn't wipe out a few days work.

If it takes you 4 trades to make back 1 loss then what if you lose 5 in a row (and don't say it'll never happen!)

Thats means you need 20 consecutive winners just to be back to where you started from. That will beat you up mentally.
  • #138
  • Mar 4, 2009 7:28am Mar 4, 2009 7:28am
Who cares about strike rate? It's your success% X R:R that matters. If you're not using stops or using a low R:R then you'll find out the hard way and have even less bankroll to play with. Having a high stike rate with low R:R will mean your account will grow real slowly 90% of the time, but when you hit that loser or losing streak your account is going to get punished. You need to turn that shit upside down, not lose 90% of the time, but manage your risk so you take a few small losses here and there, get stopped out at break even or take a small win most of the time. When you hit the occasional bullseye and get a runner then you see your account benefit. The psychology of that might be hard to stomach, but your job as a trader is not protect your emotions and feed your ego but to manage and minimise risk whilst exposing yourself to the possibility that you get 'lucky' and hit a home run. Think of an trending market - it only moves dramatically in the direction of the trend a small fraction of the time. I put it to you that your account balance should look somewhat similar.

Here is an article by Joel Rensink, aka 'TheRealThing' that might explain it better than I.
Attached File(s)
File Type: pdf Trading for Infinite yield-- Utility theory and you.pdf   378 KB | 1,525 downloads
  • #139
  • Edited 7:36am Mar 4, 2009 7:30am | Edited 7:36am
Quoting billytt
Hello to all, I hope someone can help me out.To be honest,at this moment in time i do not have the bankroll to invest as i should to maintain any sort of decent income but the thing i do have is a very high strike rate, i would say running at 90%+ and making pips from 5-50.Without mentioning words like martingale, anti martingale or compounding lol what would be a decent way to trade taking into account i use small bankroll and when i do have a loss my next few trades might not recover the loss, happy days to all

Hi Billytt,

Thank you for your post.

The nature of the market (price behaviour) forces participants to make a trade-off between frequency of opportunity, estimated target per opportunity and risk relative to achieving estimated targets.

In practise it means the following: the more you trade, the more you put capital at risk - the more you trade for small profits, the higher the risk that one individual (rare) loser wipes out a relative big part of your profit.

Partly your strategy will depend of your loss-limit, i.e. is it duarble - can you really stick to it. If you want to cut losers at -5 pips, it might be difficult to uphold. Ask yourself out of all the profits you make, which of the trades are actually starting off as serious losers and you ultimately win by holding on to them. That translates into tremendous pressure and is often impossible to carry out over the long run.

The general equation works like this:

High risk/reward ratio equals lower frequency of winning trades (which are not necessary if the r/r is high enough)

If your win/loss ratio is very high, the r/r is usually low (hence you need plenty of winners to make up for the occasional bigger loser)



Stay tuned, the issue will be discussed in more detail.

H. Rearden
  • #140
  • Mar 4, 2009 7:37am Mar 4, 2009 7:37am
Quoting maheswara
Fountainhead too ...
Yes, Maheswara - got it on my shelve...did not get 'round reading it yet.

H. Rearden
0 traders viewing now