So you have seen quite a good number of traders all over social media flipping $100 to $200, $500 to $1000 in a split second.
You look at your trading account and you got about $1000 or less. You are pacing all over your room with your hands on your chin thinking, ”How can I double this amount in my trading account as quickly as possible?” ”I need to hit it big sharp sharp” lol
No doubts, account flipping is possible in this space. But it requires some really good experience and knowledge of the market to be able to successfully do this. You need to also note that it is the most unrealistic way to make money in the forex market consistently.
” How do you mean Prof?, you may ask.
Picture this, you have a $500 trading capital, you risk 100% of your capital on a single trade and your risk to reward ratio is 1:1. The trade hits your target and you are happy because you have just made $1000. You become over confident. Your greed level increases that you risk 100% of your current balance of $1000 on another trade but this time luck runs out on you. Your trade hits stop loss. You not only lose the profit you initially gained, you lose your trading capital. You are back to ground zero and you go about saying that Forex is a scam. No Forex is not a scam. You are the scam.
”So Prof, how do I grow my trading account in a realistic way?”
Now that’s a good question right there.
If you have been following my page on IG @fx.professor, you may have heard me say severally that one of the major reasons I am able to make consistent profits is my ability to manage risk effectively.
Manage your risk
It is in your own best interest to follow good risk management at all times. Regardless of how much you need money, do not risk more than 1-3% of your trading capital on a single trade.
For instance, if your trading capital is $500 with a 1% risk, you are not supposed to lose more than $5 on a trade. This may sound ridiculous but in order to survive and last long in the business, you always have to think about what you stand to lose first before thinking about what you stand to gain. If you refuse to adhere to this simple but profound instruction, you are kuku doing yourself not me.
Do Not Abuse Leverage
Yes it is true that leverage can help boost your profits significantly but you need to always remember that it can as well cause you to loose the small trading account that you are trying to grow if you overleverage on the account. Read this article on how to use leverage. When I see trades like this in the image below, it is a clear sign that the trader is overleveraging. He is lucky that the trade moved in his direction. If he does not secure his profits and the open positions reverse, it would most likely be the end of that small account he was trying to grow. Don’t be carried away with the thoughts of making profit that you forget to protect your capital from being ruined.
Focus on Risk to Reward
As you start to risk 1% of your trading capital, aim at reaching profit targets that is at least two times your risk. It could be more but let it be at least two times what you are risking. For instance on a $500 trading capital with 1% risk which is $5 you should aim at taking trades that would yield nothing less than 2% which is $10.
“But Prof, $10 is too small”, you may say.
Ok so let me ask you, all the while you attempted flipping account, did you ever succeed in the long term with it? You most likely ended up blowing the account, right?
Now why don’t you try a different and better approach? If you’re serious about making money long term in this market, then it only makes sense to follow this simple but realistic approach to trading. Effective risk management is the basics of successful trading. If you really want to be a master at anything, you have got to learn to master the basics first.
Albert Einstein once said, ”Compound interest is the eight wonder of the world. This still proves to be true because as you compound your profits little by little, you will be amazed at how much return it would yield in a space of 6months, 1 year, 3 years, 5 years and so on. So stop playing the short term gain and think long term.
Trade High Probability Setups Only
With a small trading capital, I know there’s always the temptation for you to want to be on every trade. But you need to relax. First learn how to spot high probability set up then wait for the market to bring the opportunity to your door step. Because you need to grow the small trading account, you need to really play smart by waiting for the trade that has a higher chance of winning to come to you. No need of pursuing the market. When you do not chase the market, it comes to you easily but when you keep chasing it about, it will continue to run away with your money and give you nothing in return.
Now put your hand on your head and say this to yourself, ” I will only trade high probability setups that fit into my trading plan”, ”Any trade setup that does not align with my trading plan is a no go area for me”, ”I am among the disciplined traders who wait for the right setups to come to them”
Follow The Trend
One of the easiest ways to grow a small account is to follow the major trend of the market. If you use the top down analysis approach, it is advisable to trade in the direction of the higher time frame trend. So let’s say your higher time is the daily chart, you are to identify the trend on the daily chart. If it it is in an downtrend, your job is to go on lower time frames to plan a good entry set up to join the downtrend indicated on the daily chart. Going against the trend in most cases could do more damage to your trading account. Remember they say that the trend is your friend until it bends. So until there’s a clear sign that the trend has changed from bullish to bearish or vice versa, do not risk your trading capital going against it. Play smart, play safe. If you are struggling with identifying the trend, sign up to get started and I’ll see you on the inside.
In conclusion, I strongly advise you to approach trading in a more professional approach. If you right thing, the market will reward you but if you continue to gamble your way through, the market will continue to kick you left, right and center.
Please share your thoughts on this in the comment section. If you have got any questions, please contact me here.