The trading account plays an important role when it is about institutional and professional traders. All traders want to trade a funded account, but there are a few traders who can do it properly. Most of the traders are stuck with smaller accounts and some of them just cover only the required margin.
Trading with small accounts can be risky sometimes because you have to maintain the money management rules strictly. For instance, if an account covers only the required margin by $300, and it takes the loss of $400, then it will be very hard to trade with the account till more money is deposited.
What is trading with a small account?
It is often quite difficult to trade with smaller accounts compared to larger ones. However, larger accounts often are highly buffered against some severe mistakes, unexpected loss of streaks, and even worse traders. On the other hand, small accounts don’t have much buffer.
In addition to this, one can easily trade any market by using large accounts, but when it is about to use smaller ones, he/she has to use the market with lower margin requirements. Besides, large accounts allow flexible trading such as different contracts, while smaller ones are limited in management strategies.
Trading with a small account has several psychological issues, which make everything harder for the businessman. For instance, when a Forex trader knows that he/she can afford the losing trade before the account gets untradeable, the pressure to obtain more profit becomes enormous. If the trader can handle the pressure in a disciplined manner, he/she can overcome the situation. However, you have to remember that sometimes the best businessmen face losing trades, and nobody can do anything to avoid such trades. This situation adds more stress psychologically. Visit the site of Saxo and read some articles on trading psychology. You should get a clear idea of why the elite traders in the Mena region are doing relatively well in the investment business.
Some advice for small accounts
1. Use leverage while trading
By using leverage, you can trade the market with your small accounts. Such as, direct trading stocks will require 30% to 25% of the value in cash but trading a similar underlying stock by using the warrant market will reduce the requirement to 15%.
2. Trade-in conservative way
If you have a well-funded account, then you will have the ability to take bigger risks of making trades. Taking high-risk can sometimes ruin the entire trade. A trader with a smaller trading account is more cautious, and he/she tries to predict the movement of the price precisely. If you are a businessman with a small account, then make sure that the risk: reward ratio is profitable. Don’t forget to calculate the market in the right way.
3.Stick to 1% risk rule
Trading with 1% risk ensures smaller accounts with a similar buffer like the larger ones. Professional traders always abide by this 1% risk rule despite the size of the accounts. This rule is an excellent risk management technique.
Final words about small account
Lots of traders have stated that under-capitalized accounts can’t be used to trade properly. But their statement is not so true. In fact, using small trading accounts can be more difficult for operating a business. However, if anyone can control the account properly, then these accounts can beget profit to the business.
In addition to this, smaller accounts can bring decent earning from the business. Still, in that case, the traders must control the psychological stress, which is associated with the under-capitalization.
Experts always advise to concentrate on the risk management technique and use them in the right way. All these techniques can be helpful as they can turn the smaller accounts into the bigger ones. To grow the account, you must take the time, and slowly, you can build a larger trading account in a responsible and gradual manner.