(can) small accounts make a living ?!

If you could gain 10% per month i'd rather start with 10.000 USD and trade for 5 years without withdrawing anything and retire with 3 Million Dollars after that. 5 years of normal dayjob how hard can it be? 5 years is nothing.
You will be surprised how short 5 years are.

Ok,

Before I give a little explanation of how I personally trade (and what instruments etc.), here is a little recap of the thread.

The question was: can small accounts make a living?

The answer is two-fold.

Yes you can if the amount you intend to draw each month is not larger than in the region of 10% of your trading capital, i.e. you are looking to produce approx. 10% return on a monthly basis. That said, it is an average and making more in one month does not mean you got a bonus - put it aside for the month when you produce less.

The difficulty for many will be to assess the risk of swapping a regular more guaranteed salary for the psychologial strains of trading for a living. That is where I would say from experience (or from what I have seen happening to many people), no, it will not work out for them - especially when the responsibilites involve other family members and the decision is ultimately not your own.

To re-condition your way of thinking in a way that is necessary for most aspiring traders, can take years and during that time the associated losses amplify the difficulty of the task.

So, before you keep chewing through tons of systems/grails on the web or elsewhere, promising to make 3000 bucks every month with ease, keep reminding yourself what the overall risks are in A) starting your own business and B) starting out in this business.

Ask yourself why no other line of business (like the brokers and 'system' developers) offers such an array of offensive advertising? Have you ever seen a slaughterhouse crying adverts like: open a butcher - easy money, every month - only 50 bucks to buy a dead pig - you can sell the bacon for much more.

H. Rearden

Tjpld,

Believe me when I say (although its not the topic of the thread) when you get to a certain size, matters are not straight forward anymore.

The playing field changes drastically on all ends when your position size through compounding reaches certain levels.

Nevertheless, if a person has the money on the side to live and to trade an account without touching it for a number of years, it can of course work out.
I do ot myself - although I draw once a year under certain circumstances.

H. Rearden

Jkklim,

That is the point of my thread - no need to over-leverage.

Our test account, which containes the same trades I do on a bigger scale have been followed by my son for the purpose of this thread.

I am glad you sent your statement - now look at ours and compare. The risk never exceeded 2% on any trade, the position size was 0.5 lots throughout, we had a good amount of losers but overall traded relaxed, not every day and ended February up ~15% on a $10K account.

March obviously still going but up ~3% so far. (will post at the end of the month)

H. Rearden

I wanted to answer you via PM but it's disabled. Don't want to clutter up this thread.
I know what you are trying to say. It gets hard to open a e.g. 20 Mio Position and scalp for 10 pips. How ever it's possible to create a huge position ( you will get partial filled on many prices ) and liquidate it 400-500 Pips below or above your entry. There is enough liqudity to close everything with profit.
It will take along time untill even that becomes a problem for you.

Tjpld,

Agreed - if you have the firepower, the conviction and the guts, you get the glory. For most, that scenario will remain only a dream.

H. Rearden

As promised, a little about my personal trading approach.

I only trade intraday, so I mainly watch intraday data.

I use a 'bottom-up' multi time frame stochastic model as an 'aid-only' to trading what I see.

From that point, I try to buy or sell when prices are at what I class as 'points of low risk'.

While in stock or commodity markets, these points can be classified as 'cheap' or 'expensive' due to their nature of supply and demand, in currency trading it is a little different - but not difficult.

For most who don't follow fundamentals, it is kind of hard to really say when the pound or the euro are cheap to buy or not - so they try to rely mostly on a combination of many indicators to indicate (or find) those points.

Instead, I believe the charts tell me all I need to know - regardless of and without a forest of indicators.

H. Rearden

Ok everyone,

almost the last post in the thread.

Attached charts show 'bottom-up' stochastics (M1 M5 M15) combined with new high for the day - plus recent high on M15. If all time frames (from the bottom up) show high's in stochastics and new price high's, its time to sell with greater expectations.

New high's (or low's for that matter) on only 2 time frames means smaller expectation for the trade and new high's (or low's) for price and stoch's on M1 primary time frame means trade with low expectation in terms of possible profit. (meaning the least chance of moving a stop to b/e and pushing the trade - unlike the scenario in the attached charts with a large move)

H. Rearden

H. Rearden

I noticed you thread and wanted to share with you my experience of trading with small amounts.

I have always had much less than £1k to trade on, my first account was with FXCM trading with £300, i managed to walk away profitable from them by about 30%. I moved to Alpari UK where i'm trading on live with £100 and i have been trading with that same deposit for about 5-6 months now and still profitable.

ForexRookie

ForexRookie,

Well done - and by all means, keep building on it.

H. Rearden

Thank you for the nod H. Rearden .

Since i have started trading with small amounts i have always stuck with the smallest lots size available - i think i would this down to lack of confidence in my own trading. Personally, i think that if you want to make trading as a living it is essential that you use 2 lots per trade to begin with and then increment accordingly to your account balance and money management.

Provided that the trader has a strategy has been tried and tested, the gains should overcome the losses. Therefore, it will be possible to increase your lot size.

ForexRookie.

Great thread! I'm learning a lot.

I'm still demo trading right now and I'm trying to put a trading plan together. I've been trading mostly price action(S&R, inside bars, 123 patterns). I'm trying to keep the use of indicators to a minimum.

I was thinking of dividing the account into three parts-long term, short term, and speculation. Trades in the long term account would be based off longer term 4hr/daily/weekly S&R levels(like in the "no brainer" thread). Trades in the short term account would be taken off 15/5 minute charts. The speculation account could use either method but take more risk. I think I could do this with Oanda's sub accounts.

Trade size would always be 2% account balance(available units with Oanda). Stop loss around 40 pips on longer term trades. I would not put on a second trade until stop loss on first is moved to break even.

Trade size in speculation account would be higher, maybe 10-20%. I would need to set a limit on how much capital could be added to speculation account per month.

Anyway, that's what i have so far. Tell me what you think.

Hi all,

Last post.

Since the M1 chart (as you can see) is my primary chart to trade off, you can also see that is provides 1 or 2 opportunities on most days to make money - how much we never know in advance. I trade only the majors plus eur/yen which behaves somewhat similar to cable. So, having 1 maybe 2 low-risk opportunities per pair, times 5 pairs, almost every day, I would need to call myself a complete imbecile if I couldn't bank 0,5% on avg. with the aforementioned MM structure.

There are two threads which I would like to recommend in terms of value and as alternatives of how one can approach the markets:

1) Peter Crowns original thread about inside bars. (DIBS)

2) Billy Ray Valentines 'no-brainer' thread.

I am sure, there are more valuable threads out there but this is as far as I have (had) time to go into it.

I sincerely hope my contribution here on FF has some positive impact for one or the other reader.

All the best for all of you - whether new to the business or seasoned traders and a big thanks to everyone who has contributed in one way or another.

H. Rearden

Racetrack,

Your ideas might have merit. Keep it simple though until you feel confident and can handle it with your eyes closed.

H. Rearden

I will pop in on Monday next week to answer a final set of questions which might crop up during the weekend.

With this, I wish everyone a great and deserved weekend.

H. Rearden

H. rearden,
Thank you for your informative posts and outlining the way you trade. I will make sure my positions are not fading your method (nice profit factor!)

Cam

Greeting Mr. H. Rearden,

I want to thank you for your great contribution. Lot of people really need to read up on this thread since it's been said that... 95% of people struggle and lose in forex. This thread has been inspirational to me and to many other as well.

There is something that I am still not sure, that's the use of ''indicator''. I find that Indicators is a great tools to ''help'' you predict the trend. Obviously many of them are helpful such as stochastic, fib, ema, maccd etc... Yes, using many indicator would make trading hard because you have to wait for all of them to agree to get the best result.

To me, if I don't use those indicator, I feel that the trade made will just be depending on luck and hope because there are fib resistant..which you can't see unless you can draw the fib inside your head.

Btw, I have blown 2 account..of $1,000 like 2 times (playing $1-$2 per pip) not using indicator because the support and resistant keep breaking (bad luck) -_-;... Using indicator, i would have known not to place trade because the macd or ema wave crossing making extra boost to break the support/resistant which made the bandwagon people jumping in which make my loss worst etc.

I believe that Money Management is the best way to keep you in this game of luck provided that your luck is better than other. To me I have bad luck alot so, money management would eventually fail me if i lose too much (which really put you down, how could you not be sad if you have 90% loss.... even if you know well that the market is random). But to win in forex, I feel that indicator is a must use tool if you want to have an edge against luck. Granted it is not a high one but it is better than nothing...


I feel that the minimum balance to start trading forex is $4,000 (this mean that you already win alot in demo) and you have to win it to $10,000 to really be able to grow 10% starting from the $10,000 balance in order to keep up with the living expense in today world.


Even with the great odds against me, I still love Forex, and I believe that with further years of experiences, I will be one of the 5% sucessful forex trader.

Like you said, this thread will be forgoten due to the fact you won't be post on it anymore and I know you have more but just the time won't permit you to do so since you have to live your life. I read your post MORE than I do in any other popular ''holy grail'' wannabe system (because 90% wining ratio system does NOT reveal on internet. ). So I have been trying hard to create my own wining system. This thread has help me alot in the psychological aspect and reality of forex.


Once again, thank you for your contribution!
- Victor Raymond

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P.S :
I just want to say I have achieved the impossible by luck. I started forex demo for only 3 week, go live with a $7,000 account. Without money management, the balance drop $4,500. Then a lucky night (6 hours), I overleverage, sell at the bottom (ignoring resistant cause it keep breaking). it ended up going down to 300 pip more... making my balance up to $15,000! (no using anything, just gut). What happen to the money? well it go to pay for house and expense fee. Sad to say those luck don't happen again and small account were blowns. I have got to say it was a very HARD time for me learning to money management after (I have won so big..in one night and used to over leverage). So the Lesson here is don't over leverage. It will cause great problem with consistency later on for you since bad luck is more than good luck in forex. That's why there are many people advice you to WAIT for the right chance to make wining order. Phew, this is a long post notes....

Hi H.Rearden,
since your trading strategy use an mtf stochastic approach you may find usefull some of the thread started by Spudfyre , in particular this one : http://www.forexfactory.com/showthread.php?t=36574

Have a nice weekend
Skyline

I have to agree with this, 10% per month is 1.1^12 =3.13842838 per year so 10% per month would mean you would triple your account each year. This is impossible in the long term (it's quite easy to calculate what you have from 2k in 10 years if you triple your money each year).

I personally don't subscribe to the idea that using bigger lots is harder than small lots, it's all matter of perspective.

Would u please explain me about bikini style and give me tools for do it.