Does having adequate account size help make a success?

I think its a good idea to start with a small account untill you learn how to trade its much better to learn by blowing up $200 than it is to blow up $100000.

Trade high volume on a small balance - a loss. Trade small lot on a large balance - it's a small risk, and careful risk management. It is important to find the right balance for yourself.

The problems new traders have are NOT related to account size; rather they are related to their unrealistic expectations of becoming successful with just a few months or a year in the game.

It takes 4 years of apprenticeship to become an Electrician or Plumber; many more years to become a Lawyer or Doctor. Why people come to Forex and think they can become a professional trader in such a short time frame is beyond me. You need to commit for years to become proficient, not months.

Plus, there is so much nonsense pushed onto new traders as fact and wisdom. Such as "never risk more than 2% of your account", etc. Far better for traders to be told "never open a trade until you are 98% sure of success".

I made my first millions at 1% profit/loss per pip of price movement; and then migrated to 2.5% profit/loss in later years. That is, I started out at 1 lot per $1,000 of equity in my account. But then I moved to 1 Lot per $400.

2% account risk is simply stupid. It is a silly idea promoted by brokers because it means you will open more trades while you have an account, making the broker more profits.

Of my 39 students, none of them are allowed to start trading live with more than $200.

Do the maths;

At 2.5% profit/loss per pip, 80 pips makes you 200% profit. BUT, 5 x 10 pip profits makes you 205% profit, because you are compounding your profits.

Money Management is NOT about using Stop Losses. That is LOSS Management. Money Management is taking out profits at regular intervals so that you are soon only trading with retained profits.

$200 at opening balance, making 5 x 10 pip profit trades a day/week, and taking out 20% of the profits from day/week 2, your account grows to $75,000 by day/week 6. And of that $75,000, you have already taken out $22,000 profit.

Starting with a large account is a foolishness. It is wasteful and unnecessary.

Learn to trade. And never pull the trigger on a trade until you are 98% certain it will be a winner.

If you can't afford to lose $200, you shouldn't be trading. But move to trading on accumulated profits as a matter of urgency.

Phil, let me ask you a couple of questions:

 In your estimation, how many other FF members have traded their way to $88 million?

 How many traders (outside of you and your group) do you know that have a 98% win rate, even after 20 years of study?

If you have a 60% win rate, then you're forced to risk 2% per trade, to have any chance of survival. Why? Because as win rate decreases, the probability of having prolonged losing streaks doesn't just increase, it increases exponentially. And if you risk 2% per trade, and make something like 20%-50% return per year, then you're going need a decent size account, in order to make a worthwhile income. Hence for mere mortals, the textbook maxims make perfect sense.

There's nothing wrong with your maths. And your advice is good, but only if you're dancingphil. Unless we can predict future price movement as accurately as you can, your MM model just isn't going to work for the rest of us.

David

Hey Phil, I have also come up to exactly the same conclusion! Forex is STOP LOSS oriented game, not profit oriented one, but they do advertise it to be mostly profitable. I do know from two large LPs, the losers are about 99.99%, maybe even more than that! They have used 100% when explaining it to me! This perfectly fits your words...

I think it really boils down to your strategy.
If you trade from say 1TF with tight SL you could do with a relatively small account. And by relative I mean anything from 1K to few thousands. But if you're more of a swing or long term trader you must have a bigger account min 10K and over because you'll be setting wider SL so therefore smaller lots. Its all very relative. Not every scenario is exactly the same. You'll have to think for yourself.

Doesn't matter what your account size is, provided you keep your risk to below 2%, though 1% is best until your results merit a small increase. If you can trade, your account will grow, if you can't, it'll disappear whether it's $100 or $10,000. The ability to read the markets and time your entries, always remaining within your risk tolerance, is all anyone should think about to begin with. Everything else is irrelevant until you've mastered this.

David,

Let's be clear, almost no one here on FF came here wealthy, looking to use that wealth to peal off an income from trading. I doubt 0.1% of members here came here wealthy; let's define that as "able to fund an account with $US1,000,000". Which means that 99.9% came here to become wealthy; if their dreams could come true.

Fact; no one can get rich at 2% account risk per trade. At best, some one could make an adequate income IF they started out with a very large account ($US1,000,000 or more); and then piddled around at 2% account risk per trade. Your suggested 20-50% a YEAR for an account funded to $US1,000,000 by a wealthy person and traded at 2% account risk makes $200,000 to $500,000 a year before tax, which is only an OK income for a wealthy person who can fund that million dollar account.

So, either 99.9% of members here are wasting their time completely, OR someone should say loudly and clearly that 2% account risk WILL NEVER MAKE YOU ANY MONEY.

A 60% win rate is slightly better than a "coin toss"; as in a coin toss has a 50% chance of success. Certainly a solid win rate is a critical requirement to being successful in the long run. And it is not as hard as most people envisage or imagine. I teach that 90% success rate is the ENTRY level to success, the doorway to getting close to success. But then we also run an EA that sets a Break Even + 1 pip at 5 pips profit, just to be "aggressively conservative".

One of the greatest problems most new traders have is their lack of screen time each day. Being committed to a day-job robs them of the 12-14 hours potential screen time they could otherwise use to learn and master this new profession. And I think this defines 98+% or more of FF members. Almost all of my students are full time traders.

The human brain and its intelligence is a pattern recognition, pattern storage and pattern recall system. With sufficient intellect, and with sufficient dedicated screen time, it is very possible for people to develop their own trading system to become extremely successful. Though I maintain this success comes over years rather than months.

That said and it being true, it is quite possible that not all personality types are suited to success coming easily. Not all intellects or personality types are suited to system development. Not all "leadership/lateral-thinking" types want to spend years developing a unique and novel trading system. And perhaps people with a "follower" psyche, rather than a "leadership/lateral thinker" nature will struggle to develop their own trading system. In which case, these people are best suited to mastering a system already developed, and to apply strict discipline to the system.

Now you have mentioned 20-50% return per YEAR. At 2.5 Lots/$1,000 equity in my account, 20%=8 pips profit; and 50%=20% profit. Do I need a year to achieve that? Is it so hard to learn how to be very sure of 8-20pips profit per day? And with compounding, real wealth is very much at hand for a small $200 in a very short time frame.

My attitude David is not for everyone; we can agree on that.

But I also believe that the 'conventional wisdom" of 2% account risk etc is defeatist, and it is designed by brokers to get many more trades out of the account before the trader blows it up. If you blow the account up with one large-lot, high-leverage trade, then the broker gets one commission/spread. But if that same account makes 50 trades at 2% each, they get a much larger slice of the equity going forward.

So, it comes down to how hard is it to learn or develop a trading system that can and reliably does (98% of the time) deliver 8-20 pips profit for every day that you trade. The only reason there are not 10's of thousands of people like me David is that almost no one is thinking to do so.

I agree 100%. Which would not be a deposit, incompetent trader shall burn it. It is much more important than it was in one pocket several working strategies, and in the other - risk management, in which your losses will overlaped by profit.

Yes account size according to lot size.....
Paper is out......

If you suck at trading a big account size won't help.

Have seen that over and over again from wannabe pros and self-proclaimed gurus: they can't make a dime!

And from what i've been reading here so far i can definitely say some guys are full of s***.

The mentality that comes with smaller accounts is what I think leads to blowing accounts. Everyone wants to make money, but those with small accounts are generally more desperate and will tend to chase big profits instead of steady growth. If you have say a million dollar account you probably only need 10 or 20 pips a week to be satisfied as opposed to someone with a $2000 account who would need hundreds of pips a week to maintain a decent lifestyle. Which one do you think is easier?

There's a certain desperation when you don't have that much money to begin with, like if you don't achieve x amount of pips a week that you're going to be poor forever like this is some kind of race. Small accounts want 100 pips a week to make their $1000 a week or so because then they can quit their job or whatever. If you had a big account and I said you only needed 10 pips a week to be well off, I'm sure most members on this forum could do that. Psychologically I think account size does matter, which of course does affect your success. Amount of pips does not matter to most people, the end $$ amount does. Smaller accounts require more risk to make more money thus more losses, while larger accounts can achieve high $$ profit with a smaller amount of pips and less risk.

Phil,

Thanks for your articulate reply. We're definitely on the same page. If a trader starts with a $200 deposit, then to make anything worthwhile he must defy textbook risk. And then he needs an exceptional win rate, to be able to repeat that process without losing his shirt along the way. To anybody who understands basic trading math -- as we both do -- that's merely stating the obvious.

Agree with you about the spreads/commissions; many traders underestimate their crippling long-term effect. And also your comment that it takes years, rather than months, worth of chart study and hands-on practice, to become anywhere near good at this game. At least that's been my experience.

Textbook wisdom is based partly on institutional benchmarks. Maintain a 60% win rate and you'll keep your job with the firm. A 'good' institutional trader averages somewhere between 20%-50% return per year. Risk more than 2% and you're a rogue trader: it's not your own money that you're playing with.

I know a few 'big' private traders, and nowadays they all manage others' money, a significant stepping stone in terms of increasing their capitalization. For those who don't have a high enough win rate, trading within theoretically safe parameters is ostensibly a rich man's game.

David

Whether Account Balance helps in success depends on the trading strategy and is unique to each person.
If a trader is conservative then huge balance is required to make considerable profits.
If a trader is a dreamer then a small balance may also lead to success.

More emphasis is needed on " trading strategy " rather than account balance.

Great balance helps to trade and earn. Only if you earned it himself on the forex.
In general, the larger the balance, the less likely that you will not stay market rollback. You can trade a large lot, and if you do it right, the balance will grow like a snowball.

i've been following Dancingphils posts since he started posting here. while i was defending him at the first place, i became sceptic.

While your posts surely have some kind of entertainment value, its clear what
is your main objective: finding students who pay you money (as far as i
remember 1000$ as revealed by somebody who sent you a PM)
Of course you say that you never openly advertised it, but in almost every
single post you point out that you have students and that you teach them.
Why not charge more? Probably only the easy minded people fall for this
bullshit and these people probably could not afford more.
As you said (2013) that you live with a couple and pay a total rent of
350$/month, your monthly rent is 175$. I guess other costs of living are
cheap as well.
So with the money from your 39 students (39 x 1000$ = 39000$) you could live
pretty well in china.
But then it seems that you cannot really handle money well, as pointed out in
a thread about one of your ISP-business that failed:


"ok, i reckon ive got the most inside information here.
i used to live with Phil Jarvie.
he used to own a club in the city as well, that was his main source of fun.
he used the isp to fund the club.
he had a grand opening during the start of march that i was involved in.
which went quite well dispite phil going even more crazy and attempting to
keep the doors shut to the public unless you where female. nedless to say, we
where furious.
but before all that happened he fired the tech support guys in the isp office and let it to it's own devices. he unplugged the phones because he had no one to deal with it.
he got people to go through the old credit records and re-bill people for the two months that the accountant wasnt there for. he got people to call up and say they where not affiliated with any of the smarter companys and try to chase up money. all this so he could have some spending money for the club.
but not only was he stealing from his dsl clients, he was spending the money like crazy because he wanted to the club to go bankrupt.
i only lived with Phil for about a month, but im telling ya, it sure was a rollercoaster ride!"

source: http://forums.whirlpool.net.au/archive/169874
So you probably need more students to give you more "teaching fees".
While not all of your stories are bs ( you were talking about your business
with 250 employees and so on, Mr.Antenna seems to be founded by you
http://mailman.anu.edu.au/pipermail/...ry/000617.html ) , it
seems that after that time your ISP-businesses failed and you fled to china
to do onlinemarketing and contract-writing.
While it seems that you quit with that around the time you started bragging
on FF, most likely because its creating suspicion at your students, it seems
like you still write from time to time
http://www.stickmanbangkok.com/Reade...reader9207.htm
Did u ever showed a single proof to success, beside that singe demo account
statement ? I'm not part of your "inner circle" but i doubt that any of your
students had significant success or that you showed them any kind of proof of
your success. One of your former members claimed so as far as i remember.
So imho FF should mark you as a commercial member, because that is what you
obviously are.

Account size has its own importance in profit taking . I must say some times low capital is negative impact in success. If one had a good trading skill he will be bound with less capita. not make good money from market situations. He will be bound to take low risk with it he can only make small profits. With good account size one is free to take advantage of market with his ability.

Even a blind man can see that this dancingphil is a clown.

+1

In my opinion, the only major benefit to starting with a large balance... is that losing it would be a more painful (more effective) lesson.

Honestly the only disadvantage of a smaller account is that less adjustment is possible. If you're portfolio is say $1k and you have Sentiment on EURCHF, USDJPY, and USDCAD, let's say you set max leverage to 9:1 ($9k max notional) if you allocate 3 lots on EURCHF, 3 lots on USDJPY, 3 lots on USDCAD. In this scenario you can only take profit 100% of portfolio at a time. Now lets say you have $20k, leverage 5:1 (100k notional). You can now adjust your portfolio by 5% at a time. This can be advantageous in obvious ways. It is even more useful with more pairs in your universe, perhaps trading 9 pairs. You would be incapable taking partial profit on a $1k account, assuming 0.01 min lot. However with $20k you're now restricted by 1% of your notional position vs 11.11%

However a small balance is advantageous in short term trading in the sense you can enter/exit with minimal slippage, this could be beneficial dependent on your investment approach.