Should I take large risks when developing a small account??

[Attila the trader]

HI , my portfolio is up by 33% this year( since late September) , but I have a small account, and since the dollar value is low even a 100% gain over a year would not feel like much.
should I engage in more volatile trades and try to get the account up to a decent level, before slowing down and taking less aggressive trades; or should I continue on this slower and safer path ,slowly adding more funds to the account as I receive it from other sources. I'm not trying to get rich quick nor be greedy.

 

[Farm Yard Forex]

No, this is what trips many up. They get some success and take more risks to be more aggressive in the assumption that this success continues. Higher risk means more chance of failure. It is as simple as that. Stick to what you are doing and submit to the time it will take for compounding to grow your captial. If anything lower your risk then.

 

[dusktrader]

I have to agree... depending on your definition of "small account". I consider my accounts small, but at the same time I consider these active research accounts. In other words, I want the money fully utilized.

I have come up with my own way to divide risk and I like how it works so far. So you may also want to consider creative ways. In my case, the research account(s) are for learning only, and to me I'm ok if they lose even 100%. If the equity falls unexpectedly I will cry, but that's about it. Then I'll take a breather and re-fund the research account(s) to try again.

So I currently have 10 research accounts each of size $1000. Inside each account I allow only 1 pair to trade. Each account has it's own different pair to trade. In my trading style I trade 20% of the account equity per trade. Feels meaty, and can give a nice wild ride when the bot is working.

But in other math, this is actually placing 2% equity at risk per trade. 20% of $1000 is 1/5th of the account, or 1 equity unit out of 50 possible units in all accounts.

Anyway, hope this doesn't confuse. Mainly I just wanted to suggest that you could get creative with your risk management, depending on what you expect from the account. In my case, I expect the fastest learning experience possible, and I'm willing to get burned to get there faster.

 

[Attila the trader]

No, this is what trips many up. They get some success and take more risks to be more aggressive in the assumption that this success continues. Higher risk means more chance of failure. It is as simple as that. Stick to what you are doing and submit to the time it will take for compounding to grow your captial. If anything lower your risk then.

but if I continue at this rate, it would never grow to a useful amount without external funds, I agree that past successes does not guarantee future wins. but i would have to at least 3X my account to make those 10% 20% wins count

 

[Attila the trader]

I have to agree... depending on your definition of "small account". I consider my accounts small, but at the same time I consider these active research accounts. In other words, I want the money fully utilized.

I have come up with my own way to divide risk and I like how it works so far. So you may also want to consider creative ways. In my case, the research account(s) are for learning only, and to me I'm ok if they lose even 100%. If the equity falls unexpectedly I will cry, but that's about it. Then I'll take a breather and re-fund the research account(s) to try again.

So I currently have 10 research accounts each of size $1000. Inside each account I allow only 1 pair to trade. Each account has it's own different pair to trade. In my trading style I trade 20% of the account equity per trade. Feels meaty, and can give a nice wild ride when the bot is working.

But in other math, this is actually placing 2% equity at risk per trade. 20% of $1000 is 1/5th of the account, or 1 equity unit out of 50 possible units in all accounts.

Anyway, hope this doesn't confuse. Mainly I just wanted to suggest that you could get creative with your risk management, depending on what you expect from the account. In my case, I expect the fastest learning experience possible, and I'm willing to get burned to get there faster.

I have a 4 figure account , my goal is to get it into lower 5 digits , so i can trade less aggressively , i definitely dont want risk as big as your research accounts!

 

[No_Fear]

I have a 4 figure account , my goal is to get it into lower 5 digits , so i can trade less aggressively , i definitely dont want risk as big as your research accounts!

It depends on if you are willing to take a chance to blow up your account for a chance at 5 digit. Like if you can top it up with money from your salary easily then you can try to be more aggressive then usual.

But you will have the same mindset when you reach 5 digits you can easily lose it all.

 

[Melodiousmelody]

Yes!
Taking risk is not wrong but always keep in mind that you must take only that amount of risk which you can afford.

 

[Henow1969]

It depends on the type of trader you want to be. With a leverage of 1:100, you can start with $100 but just don't get greedy, as your gains will be too small and people tend to take bigger risks to flip their account.

 

[Farm Yard Forex]

but if I continue at this rate, it would never grow to a useful amount without external funds, I agree that past successes does not guarantee future wins. but i would have to at least 3X my account to make those 10% 20% wins count

Then trade sustainably and add small amounts of external funds as and when you can. This will be more sustainable than using higher risk I promise you. Capital preservation should always be priority one. Successful traders focus on mitgating risk first.

 

[Farm Yard Forex]

But why take large risks with a larger account? Keep the risk low regardless and focus on refining for better reward.

 

[sharabela]

HI , my portfolio is up by 33% this year( since late September) , but I have a small account, and since the dollar value is low even a 100% gain over a year would not feel like much.
should I engage in more volatile trades and try to get the account up to a decent level, before slowing down and taking less aggressive trades; or should I continue on this slower and safer path ,slowly adding more funds to the account as I receive it from other sources. I'm not trying to get rich quick nor be greedy.

Of course not. You must be disciplined in every second while you are in the market. Risk management suggests that a trader should not take more than 2%-5% risk in a single trade. Some suggests even less than that. It is a very risky business. If you want to play against it, you will seriously get hurt. Be patient and trade as a professional trader. Do not gamble in the market.

 

[LuckyMac]

I wouldnt to be honest, i think slowly building even if its small is the way to go. If you're being aggressive you need to have a strategy that works, your confident in and can pull off. Also you need a bigger bank so say 1k split into 100 separate tries as you will bust on some there is no way around that

 

[tomorton]

Even a major gain on a small account still only leaves you with a small account. And there has been no learning and development to help you manage a larger account.

Its worth keeping in sight that its possible to become financially secure starting with a small account and taking only small risks using only a modest strategy - as long as -
1. you stick with it year after year
2. you don't need to withdraw capital to pay for your living costs

 

[Smith2525]

Go for it. No guts, no glory.

 

[JohnnyForex]

Seeing how the thread was started in November last year maybe the OP should give us an update?

The thing is if you DO take large risks it can work out. In fact, it's incredible when I read Market Wizards books and reading how many of them simply gambled on one big trade which took them into the big leagues. I assume they scaled down after that or blew up after the books were published. I'm saying gambled because these guys took on such big risk that the other outcome would have blown their accounts.

The odds are however that as soon as you do take a shot at a big trade you'll end up on the wrong side of the market sooner or later. I've taken some big risks and been rewarded for it, but equally hurt on losses. I do think taking more risk with a smaller account is OKAY, but within common sense.

I always tell myself that I should never put myself in a situation where the outcome of one single trade is life changing. At least to the down side. The best is to see if you can press your winners and even add positions to a winning trade in a strong trade. Most seem to do the opposite, though, i.e., cut your winners short and ride your losses hoping they'll turn around.

Hope. Erase that word from your trading vocabulary.