How To Grow A Small Trading Account | Overcome Challenges & Pitfalls
BY Chris Andreou
|4 29, 2022It’s great that you’ve decided to learn more about how to grow a small trading account. So how can you grow a small trading account – even a few hundred Dollars – into a larger amount.
The quick and simple answer is that you need to be consistently profitable and compound your returns over time. In other words, take the money earned from your previous successes and put it right back into trading.
With that being said, the objective from trading is to make the whole thing meaningful right? So why would you trade with just a small amount of money? Not that it is a bad idea, it completely depends on the circumstances. Just appreciate that trying to grow a small account has its own challenges.
In this article, I will explain how you can grow your small account, the challenges involved and some suggestions to overcome them. Keep reading to learn more, let’s get started.
TIOmarkets has an account type to suit your budget, start trading with us today.
Can you grow a small trading account?
Yes, you can grow a small trading account. But you must be consistent and disciplined in your approach so that it can pay off in the long run. In fact, most people start trading with modest investments and try to grow it over time. However, trading with small amounts brings its own challenges that otherwise would not exist when trading with larger amounts.
Here are a few things to consider as you set out on this journey of growing a small trading account.
Growth can be challenging
Everyone who starts trading wants to make a lot of money and usually, they want it sooner rather than later. But when trading a small account, the rewards are also going to be small and this has psychological implications. You may even start to think, is it worth it? And convince yourself to give up.
Even successful strategies involve loss
No matter how diligent you are at back testing or even if you have a strategy with an edge in the marketplace, there will always be losses. Growing a small trading account or a large account for that matter is not a linear process, there will be setbacks along the way.
It will take time
You need to set realistic goals to grow a small trading account and allow the magic of compounding to do its work over time. You will need a money management plan to support growth and also the psychological fortitude to stick to it with consistency and discipline.
Why trade with a small account
If you are new, inexperienced or don’t have much money to trade with, it would be a good idea to start trading with small amounts. As this gives you a chance to learn how to trade without risking too much. Further to this, there are more advantages to trading with smaller amounts.
The Pros of trading with small accounts
You can survive early mistakes. I have seen traders start with large sums of money and blow the lot in a relatively short period of time. Then the redeposit again it might seem like they can start over fresh. The only problem is that they often make the same mistakes and it costs them even more money. The previous losses don’t go away, they can mount over time which makes it harder to recover. If you start with a small account, you can make mistakes but it won’t cost you as much in the long run.
Also, trading with a small account allows you to try trading in many markets to find out what you like. Which in my opinion, is quite an important point because not all markets are affected by the same things and you might prefer trading one asset class over another. Furthermore, some trading strategies will be better suited to some markets.
So you can try different strategies to find what works for you, in your preferred markets. We all have different personalities and risk tolerances, and what works for one person may not work for another. The only way to know for sure is by trying different markets, strategies and styles of trading for yourself to find out what fits.
Cons of trading with small accounts
None of this doesn’t come without some disadvantages as well though. Small accounts lack the flexibility of trading larger accounts. This is particularly true when it comes to money and risk management, which is crucial to successful trading. When you have a small account, your money management options are more limited.
For instance, you might not be able to risk 1% or 2% of your capital on a single trade due to lot size restrictions. This can be frustrating when you see quality setups arise and you aren’t able to take advantage of them because your money management rules won’t allow it.
Stop loss orders must also be placed more carefully. For instance, if you were trading with a $500 account and risked 1%, which is $5, your stop loss can not be more than 50 pips away when trading the minimum lot size. You have a smaller margin for error, when trading with smaller amounts.
Another disadvantage of trading a small account is that it takes more time to generate worthwhile returns. If you are trading an account with only $500 in it, making a healthy 20% per year is only $100.
Now with all that being said, the way to grow a small trading account is the same way that you would grow a large account. You just have to do things proportionally.
Now, I will explain how to grow a small trading account, the smart way and the high risk way. All in my own opinion of course.
The smart way to grow a small trading account
Stick to markets you know well
One simple and smart way to begin is by sticking to the markets you know well. It may take you some time to figure this out, but if you stick with one or two markets, you’ll find that it makes the process a little less complicated. Sticking to fewer markets that you know well will also allow you to develop strategies specific to that market and limit over trading.
Trade high probability setups
There are only two ways to increase trading profits, increase your win rate and simultaneously increase your average profit. The best way to do this is to identify high probability, low risk trading setups and only trade these. Try to refrain from trading on a whim or outside of a trading plan, because losses will set you back and you want to limit this.
Create a trading plan and stick to it
To grow your trading account, you need to have a trading plan. Trading plans help you stay disciplined and focused on the right things in your trading. Which include the conditions you are looking for to enter and exit the market. As well as the money and risk management aspects involved, this is the key to growing a small trading account.
Risk a small percentage of your account per trade
There are a lot of ways to lose money trading, but there is only one way to grow your account. That is simply by making more money than you lose. So the primary focus should be on keeping as much of the profits as possible, while minimizing the risk of loss. If you are not consistent with the amount of risk per trade, the next trade could potentially set you back significantly. Ideally, the risk should be consistent and the potential reward should be more.
Compound your returns
You’ll have an easier time growing your account if you can squeeze out a little extra each week or month from trading. This can be done by increasing your lot size in proportion to your growth and account size. Compounding your returns in a responsible manner can help exponentially grow your account over time.
Make regular deposits to help grow your account
If you are trading a small account with the objective to grow it, another great way to do that is by making regular deposits. You could start by agreeing to deposit a small percentage of your salary into your trading account every month. This way, you’re building up your account balance with smaller deposits over a period of time.
In addition to the suggestions made above, you can potentially grow a small trading account faster by considering some of the following. Just be aware that the risks increase by doing so too.
The higher risk way to grow a small trading account
Risk a larger percentage of your account per trade
It’s simple math, if you risk 1% of your account per trade and make a 2% return, you could double your account in just 50 trades. On the other hand, if you risk 5% of your account and make 10%, it could only take 10 trades to double your account. By risking more per trade, you could potentially make more and grow a small trading account faster. However, keep in mind that you could also lose money faster as well.
Trade more often with a high frequency trading style
Another way to grow a small trading account faster is to increase the frequency of trading. In other words, the more trading opportunities you have on any given day, week or month, the more you could potentially make. Scalping or day trading are two trading styles that you might want to look into further. But be mindful that more trading opportunities can lead to over-trading and mean taking setups with less probability of working out.
Follow and trade more markets
You may be eager to take advantage of all possible trading opportunities in an attempt to grow your account faster. Another way to do that is to follow and trade more markets to find and increase the number of opportunities to trade. Keep in mind, like the previous point, that over-trading can be a major pitfall.
Are you ready to give this a try?
How to start trading a small account
If you haven’t already got a trading account, you can create one with us and start trading with small amounts. Just follow these simple steps to get started.
1. Register
Start small with TIOmarkets, register your account, it only takes a few minutes.
2. Open a demo or live account
You can create a demo or live account from within your secure client portal.
3. Download the trading platform
Go to the download centre, and download the MT4 or MT5 trading platform to your computer or smartphone.
4. Deposit funds
Go to deposit and select your deposit method. You can start trading with a small amount.
5. Log in to the trading platform
Log in to the trading platform and you should notice your balance reflects your deposit.
Now you can start trading and try to grow a small trading account.
Conclusion
There is no doubt that trading is a lucrative opportunity and there are ways to grow a small trading account faster. The first thing that you need to know about trading with a small account is that it will take some time before you see significant results. In this article, we spoke about many ways that you can do that and the best way is the same way as growing a large account.
You need to have a plan and take high probability trading opportunities, while keeping the risk proportional. Then have the discipline to execute consistently over time and compound any returns.
There are also additional things you can do to speed the process up, to trade a larger account sooner. Such as making frequent deposits or even increasing the risk and the frequency of trading.
Growth is challenging and there are pitfalls to be mindful of along the way. So you might be thinking, “What’s the point in even trying?” The point is that you can trade and grow a small trading account. You have to start somewhere and you can scale up over time.
TIOmarkets has a trading account type to suit your budget, register and start trading today.
Risk disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Never deposit more than you are prepared to lose. Professional client’s losses can exceed their deposit. Please see our risk warning policy and seek independent professional advice if you do not fully understand. This information is not directed or intended for distribution to or use by residents of certain countries/jurisdictions including, but not limited to, USA & OFAC. The Company holds the right to alter the aforementioned list of countries at its own discretion.
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