Do you trade with a small account? Do you always blow it up because you try to make a reasonable sum of money? In this article, we will look at this common problem and maybe help you find some solution as well!
Are your trading expectations unrealistic?
As an example, let’s have a look at a $5000 trading account.
If you risk 2%, which is $100, what returns you can expect?
With a 1:1 Risk to Reward ratio, you can expect $100 on every winning trade.
In the United States, the average monthly income is around $4000.
To reach this income with a $5000 account, you would need to make 80% every single month.
That is unrealistic.
If you think you can make 80%, this calculation doesn’t contain losing trades that are part of every trader’s performance.
This undercapitalization is one of the biggest reasons why traders blow their accounts.
There are two main reasons why this happens.
Undercapitalization has a direct correlation with trading psychology.
If you cannot afford to allocate a more considerable sum of money to your trading account, you always trade with a fear of losing your money.
Trading under pressure is a big disadvantage which all traders try to fix.
Traders also often recalculate their capital to material things that they could purchase.
“For $5000, I could rather buy this or that instead of trading.”
This further undermines traders’ confidence that leads to more mistakes in trading.
Almost everyone uses social media daily.
Instagram is, without a doubt, the most popular among the traders.
If you search hashtags such as #forex or #forextrader, you end up seeing thousands of results showing a luxury and lavish lifestyle.
Expansive cars, private jets, luxury mansions, sums of money, etc.
For a trader that trades with $5,000, this is a big trap.
Everyone wants to be in a role where they can afford anything they want but don’t realize that it is simply not possible with the capital they trade.
How to solve these problems?
Joining a proprietary trading firm such as FTMO is a great solution to the problem.
If you show us that you can trade, and follow our risk management rules, you can become a trader for our company.
We give you up to $100,000 of virtual demo money in your FTMO Account that is connected to our prop firm’s live trading account. That’s not bad, right?
As you are doing all the hard work, we only take a small cut of 30%, and you can keep 70% of the gains that you make on your FTMO Account.
On $100,000 account, making 10% a month will net you $7000, which surely covers all the living expenses, and you will also keep something extra.
And you know what the best thing is? You have zero risks in the capital.
Our company covers any potential losses that we incur.
Together, we solve undercapitalization problems so you can trade care-free and with much less psychological load.
As always, be aware that trading is a risky business and this article does not serve as a promise or proposal. Every trader should consider his/her own financial situation and only risk the amount of funds he/she can afford to lose.