Very Low Capital Trading

The problem with trying to trade a SBing system with low capital, if you have a bad run you will often run out of money before the system has had a chance.

I tried trading with systems and found that although over time the system made money, with low capital, I couldn't get past the bad days/weeks.

With low capital, Discipline and a good set of trading rules seem to work far better. Also it is difficult to have decent money management rules with low capital, sometimes you have to risk more than you should. I have found you have to be a bit more creative when starting on low amounts. One thing you should never ever do, is to increase your stake after a loss - far better to reduce it and stay in the game longer.

I certainly like your idea!

I think there are a lot of people out their (like me ) that just want to know they have trading skills or not! And i don't think many of them want to risk thousands of dollars to conclude they haven't these skills!

You can say that something like virtual accounts will do the job, but it isn't the same! I think you will certainly learn something, but playing with virtual money isn't the same thing as trading with your hard earned money!

So any tips and tricks are welcome I think! Some good ones are already give!

It is often said that many traders when in profit close there position to early locking in small profits because they are afraid they are going to lose what they currently have in paper. It really depends what your time frame is but essentially you should apply a form of profit taking system or trailing profit exit or target system.

Letting a winning deal run is where you get into the market on one of your signals and you do not close until you get a signal to do so that way your profit will increase. If you let your emotions get the better of you then the trader will often accept a profit but it may often prove more was on offer.

The object of a stop is to get out quickly those deals that are not working so that you limit your loss, but to let a winner run is to allow the profit (within reason) to replace any losses and forge ahead your profits. For example I set my stop loss at 6 points maximum (for my daytrading although sometimes I will close for less) yet profitable day trades can return 2 - 10 times this amount. In the past I was guilty of always taking profit when I had 5 - 15 points and would never get above this, now I let a trend deal run its course on an intraday basis.

Your trading plan should account for this in the manner that you will react to the changing market conditions from whatever time frame you trade from so that your profit taking strategy or stop policy is acted on accordingly.

I hope this helps.

Kevin

Adrian

I agree you need a decent amount of capital before you consider trading for a living. My comments were in relation to those aspects that could be addressed when trading with small capital. When you have less capital the main risk would be to overtrade. I do not mean in the number of trades although that can be an issue but in the size of the deal relative to your available trading capital balance.

As for Spreadbetting it can be a tool to establish a strategy using low capital for the test and to build on for direct access and conventional trading methods.

Good luck with your book

Kevin

Adrian,

I love the topic you started.

It sounds like an excellent way to practice and test one's skills, judgement and temperment before committing large sums of money!

What resources were required to accomplish what you did. e.g. newspaper? live feeds? software?
Any particular strategies/techniques proved to be valuable and where to find information about those?

Of course the missing ingredient is your 15+ years of experience, but hopefully a few pointers can reduce the cost of learning
--
Alan

Trading with small capital is good for new traders to gain trading experience or anyone to test an unfamiliar market, at least it is more exciting than just doing paper trades. but do not expect to earn a living from it. cos i would imagine that its like trying to bring an oak tree down with a pen knife...

Hi,

Trading with low capital is different from having large amounts of money committed. Using the same strategy for both probably won't work. It is good for practicing discipline and sticking to your rules. With small capital if you break your rules with regard to money risked, entry and exit. It can be fatal and you may not get another chance. On the two occassions I have not stuck to my rules it has been costly.

I never base my decisions on newspapers, although it is worth keeping upto speed on what is going on in the financial world. I use real time charts and the software I use is Excel and Updata TA.

The strategy depends on what you are trading, but having an understanding of TA patterns can be a great help (Even if only a basic understanding). I use different strategies for different markets and have a few techniques I use. I have a few sneaky tactics that I use for boosting initial capital.

Keep moving your stop loss up behind the winner, once you have your stop loss at 'break-even' you have nothing to lose by letting the winner run, then keep edging the stop loss upward. Of course if the instrument is 'bouncing around' then you' ll get stopped out but if you do this often enough you'll get a winner that will run. Thursday pm was good for this on the US stocks - the DJIA did a nice smooth upward run for a couple of hours making an easy profit with little stress. Friday on the other hand was rough - got stopped out very early on, but losses were kept to a minimum.

I've found that betting on the indices is a 'low cost' way of getting into trading and generally less stressful than some of the instruments I've tried following.