Trading’s a great way to turn a profit, whether you do it for a career or in your spare time, and I’d recommend anyone who is interested to dip their toe in the stock market. But one of the main reservations people have when it comes to starting their trading is the fact that they don’t have a lot of money to play with.
However, the idea of needing a large account in order to trade is a common misconception. Trading with a small account size is totally possible and profitable.
How do I know this?…
I know because I’ve done it!
As some of you know, I used to be a single mom who didn’t have a whole lot of money to work with, but I used these tips and tricks to grow my account into what it is today:
Slow and Steady Wins the Race
When you first start out trading with a small account you’ll only be able to risk a moderate amount of money per trade. Because of this, it’s likely the profits on these trades will be much smaller than that of someone else who has a larger account. But these small wins should not be overlooked!If you made even just $30 per trade and did that ten times in a row, you’re on your way to $300. And with that small growth in your account, maybe next time you’ll be able to make a slightly larger trade for a $40 dollar gain. When I first started, I worked on making $50 per day. Now $1-2k per day is what I’d consider a good day. Wash, rinse, and repeat this process and in no time you’ll be on your way to a larger account size.
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My Stacked Profits strategy is ALL about trading small accounts — click here to learn more.
Don’t Be Afraid of Aggressive Trades
Smaller, conservative trades are key to building a regular process and cash money flow, but even just a handful of aggressive trades can make all the difference. Conservative trades are great, and you must do them to learn discipline and patterns, but at some point dipping your toe in the water for something a little riskier makes sense. Last year, TSLA and SPCE were two of my biggest individual wins — but also, two of the most aggressive trades. In order to grow your account size, you can’t be afraid of putting on aggressive trades — when you’re ready. If you don’t you’ll be stuck making those same +$30 trades, and while those are great in the beginning stages, it wouldn’t allow your account to grow as fast or live up to its true potential. One of my favorite John sayings goes, “Earn the right to trade bigger.”
Get Your Ratios Right
Being aggressive in the stock market is an absolute must if you want to get large returns, but it’s also important to spread out the degree of aggression amongst all of your trades. I generally like to keep it on a 2-4-4 scale.This means that if I’m putting on 10 trades at any given time, two of them will be aggressive, four of them will be moderate, and four of them will be safe. This helps protect me in case my aggressive trades go awry. This is something most newbies get wrong — they either go all aggressive or all conservative — it’s all about the mix!
Diversify
Along with the varying degrees of aggression, your trades should also be diversified within the market. I like to separate the market into sectors and look for winners within those segmented parts of the market. This is another tactic to help protect my profits just in case one of those sectors of the market crashes. For example, I don’t have all of my trades in tech at the same time, perhaps I’m trading tech, COVID names, and consumer discretionary. This gives me a bit of a mix, so if tech gets hit on news, the others stay afloat. If you want to see the process I use to diversify and segment my portfolio, read last week’s newsletter here.
Remember to Skim Your Profits
Now that you see how all those small trades can add up, you can see that your account will naturally grow allowing you to place larger trades. As I said, I highly encourage this! It’s a great way to consistently grow your profits. However, one major rule I live by to this very day is to always skim your profits. This means, when you’re making money, take some off the table. Don’t be greedy! By doing so you guarantee to stay in the green despite what the market conditions are. Plus who doesn’t want to eat the fruits of your labor every once in a while, right?
Taking the plunge into the world of trading can seem scary, but the amount of money you have to invest shouldn’t be a deterrent. Living the trader lifestyle is achievable for anyone out there who wants to take the leap of faith.
P.S. This newsletter is the sneak peek I wanted to give all of my dedicated Five Star readers. And, you’re the first to know — coming up soon, I’m having a webinar coming up next month! The second I get all the details, you’ll be the first to know! During this webinar, I’ll be discussing the details about how I did it myself, and how you can too. Look out for more details coming soon!
When you say “skim your profits” exactly what do you mean? If I bought 10 shares of xyz at $10 a share and now xyz is $15 a share would I sell 3 shares and invest in something else or go out to dinner?
I wondered if you have a service whereby you let us know the trades you are getting into just before you do..
Hi Danielle, I wish I knew how to start. I have Ameritrade taking $20 per week out for 2 months now and I have about $1000 saved over the last month. I’m obviously starting small but how do I start?
Danielle,
Thank you for some very good points!
It helped me, especially the ratio!!
Johan
The 2-4-4 seems prudent. Thanks for guideline.