Trading Tips

You can't expect miracles from a small account

Everyone who starts investing or trading Forex has some expectations. These expectations include the need to secure sufficient capital for trading. Someone who wants to make extra money alongside the day job will need a much smaller account than someone who wants to trade for a living. Therefore, whether the trader’s goals are realistic or not often depends on the size of his account.

Nowadays, it is possible to open a trading account with a brokerage firm with an account balance of several hundred dollars. For some potential traders, this may even look very tempting. However, they often believe that after a few successful trades they will multiply their small account enough to make a living from trading which is very naive and unrealistic.

Small account, small profits

As an example, we can take an account size of $1,000. If we assume a 2% loss per trade and set the money management to an RRR of 1:1, each profitable trade would bring us a profit of $20. In order to double this account or to make at least $1,000 per month, we would need to make 50 profitable trades in a row. If we count 20 trading days, we would have to make 2 to 3 profitable trades per day.

Three profitable trades per day may be a realistic variable in this case, however, it is unlikely to achieve in reality. 50 profitable trades in a row is practically impossible to achieve because we have to count on losses. This means that we would need many more profitable trades, which, of course, will lead to the need for a much more proactive approach.

More trades, higher risk of losses

More trades can lead to a higher probability of losses, and as a result we end up in a vicious circle. In the end, we may find that a 100% profit per month is an extreme value that is theoretically possible to achieve, but practically almost impossible. And in the long run, it is indeed unrealistic.

Finally, we can add that earning $1,000 a month will certainly not be enough for a trader to make a living. Therefore, even a very good success rate can lead to frustration or, in the opposite case, to the feeling that quick earnings are a given. In either case, the trader will feel that the best solution is to increase the size of his positions and therefore to increase the risk per trade.

Psychological game

Trading in general is a psychologically demanding discipline and with a small trading account it is even more difficult. It is a known fact that most Forex traders are unable to make positive returns over the long term, and with a small account the likelihood of consistent returns is even lower. Traders with a small account constantly face the pressure of losing their money and trading under pressure leads to mistakes, which in turn leads to frustration with poor results, a drop in confidence, more mistakes, and eventually to losing the trading account.

Influence of the environment

On top of all this, there is the pressure of the environment, which again has a very negative effect on the psychology of traders with small accounts. It’s not so much about proving our skills to friends and acquaintances, that’s not why we trade. Rather, it’s because nowadays there is an abundance of content on social media that portrays successful traders as people who can afford expensive cars, jewelry, houses, or even private jets, etc.

This is a big trap for young people, who most often belong to the group of traders with very small accounts, because they feel they should have that too. Having enough money is not a bad thing, most of us get involved in trading for the money which can serve as a strong motivation. The problem is that many traders feel that trading Forex is a way that will allow them to earn a lot of money almost immediately. Such unrealistic expectations lead to traders looking for shortcuts and other ways to make a bundle of money as quickly as possible instead of using sensible risk management and money management. What they don’t realise is that they won’t achieve this goal with a small amount of money.

FTMO offers a possible solutions

Being one of the leaders in the prop trading market, FTMO offers such traders the opportunity to trade on a funded FTMO Account much larger than they could normally afford. For traders who are able to achieve consistent results and are no strangers to proper money management and risk management, FTMO has accounts available in a size that suits them.

Anyone who can demonstrate the ability to trade and achieve reasonable profits and follow simple risk management rules in two phases (FTMO Challenge and Verification) will be given an opportunity to trade an account of up to $200,000. A larger account means that the trader is not forced to open trades which are too risky and does not have to execute many trades a day in order to achieve great profits. With reasonable money management (profit per trade of 1% to 2%), each profitable trade can be financially rewarding and a profitability of around 5% per month can provide a trader with a very good income.

Discipline pays off

Every trader who is able to obtain an FTMO Account can count on a payout ratio of 80% (80 percent of the profits made goes to the trader). Those who are able to consistently make profits (at least 10% of total profit over a period of four months) can then look forward to a 25% account increase and a payout ratio of up to 90%. Even with a minimum amount of funds invested, a consistently successful trader can eventually trade an account of several hundred thousand dollars and make their dreams come true.

Most of us have experience with a small trading account and the disadvantages that come with it. The larger trading accounts that FTMO offers to its successful clients can significantly reduce stress and most of the psychological burden, which can ultimately have a very positive impact on the results. Everything else is then up to the traders themselves.

About FTMO

FTMO developed a 2-step Evaluation Process to find trading talents. Upon successful completion you can get an FTMO Account with a balance of up to $200,000. How does it work?.