Very Low Capital Trading

[adrianallen99]

Im writing a document on trading with very small capital. This is not meant to be a recommendation or condone trading with not much money. The aim is to provide some information on pitfalls and possible strategies for staying alive with sub £500 capital.

There are people, including me, who when faced with to trade or not to trade senario and little money, opt for trading. Its a make or break situation.

If anyone is interested in this or has any ideas (Don't tell me how stupid it is or call moan at me for even bringing the idea up), but perhaps give information on risks and your experience. I actually enjoy the challenge of turning next to nothing into a decent pot.

How did I get interested in this. Last year a friend gave me £75 and bet that I could not turn a decent profit by the end of the year investing in shares with a standard online broker. If I won I kept the money, if I lost I paid him £150. I had 6 months and could not top the account up. Fees were £12.50 a trade, so I was down first trade. After 3 months I have made over 600% gains and paid over £100 in commission.

This year I started with just £20 in a betfair account, I finally broke £3000 this week. A moment of madness early on cost me £500 and wiped out half my account, but has been pretty steady. Hardess part is excepting that £5 is a good daily gain on an account under £100.

Im not new to trading and the stock market, in fact I have been studying and playing the markets for over 15 years and setup an investment challenges at school in my business studies class back in the 80's. I managed to lose large amounts in an impressively small amount of time.

 

[bracke]

adrianallen99

I think that you idea is a good one.

I have no doubt that there are many who visit this site who have very limited cash available for trading but would like to do so.

Money management & self discipline is very important particularly when the available capital is small

You appear to have been very sucessful with your trading and I am sure that many of us would benefit from your knowledge and experience.

I look forward to your further posts

Regards

bracke

 

[adrianallen99]

Most people fail with small amount because they set their goals to high. Ive seen people make 1000% in a week, only to lose it all the next week.

Check bullpig.co.uk it is a forum/community for Betonmarkets.com. Look at the Combined P/L it is minus $274,119. Which is an average loss of about $600 per person. The highest weekly gain this week is Tiffany with 721% which is very impressive, but in the end always turns sour. With low amounts, staying alive is the name of the game, breaking even is a good result.

 

[dc2000]

Hi adrianallen99 I also think this is a good idea will it be in the form of a diary of your experiences or as a guide to a specific way of trading ie Forex, fixed odds, cfd's etc.

I also have a challenge which I am interested to take and will detail on the spreadbet thread

 

[adrianallen99]

Maybe part guide, part experiences. I learn quite a lot from having such small amounts (Okay, so you learn very little from trading with £20). My aim was not to make loads of money, it was more to make some money and fairly consistently. Along the way certain amounts seemed to pose problems (more phycological than anything else).
Getting past £100 was fairly easy as there was not much to lose, staying above was harder. Once I hit £200 it was relatively simple process getting up to £400-500.
My biggest hurdle was breaking £1000, I came withing £40 then decided to make one more trade that day to just push it over. I lost the trade and was back below £900, so I traded again and lost. Not to be outdone by the markets I waited for a really good opportunity and made the trade, it was going well, but it turned heavily against me and in an instant i was down £200. Good fortune seemed to be with me and it started to come back and I was just £100 down. In the next few minutes hope turn to sheer horror as I saw over half my account wipe out. I sold leaving just £360 in my account. I switched my computer off and walked away feeling sick.

It took me 2 weeks to recover financially and make back what I lost and finally break the £1000 barrier. Of course I could have have just put an extra £50 into my account to take me over that barrier in the first place

 

[Buddhist]

I think this is a really good idea. I am not down to my last £50 but as my previous posting made clear I dont want too many mre bad weeks like this last one or I might well be. I think that being careful or being dead is a sound approach and one which I need to develop whatever amount of capital I have; it is a discipline I would benefit from. Lets hear about how you did it and what strategy you followed. I for one am very interested.

David

Maybe part guide, part experiences.

 

[neil]

spread your bets

Most people fail with small amount because they set their goals to high. Ive seen people make 1000% in a week, only to lose it all the next week.

Check bullpig.co.uk it is a forum/community for Betonmarkets.com. Look at the Combined P/L it is minus $274,119. Which is an average loss of about $600 per person. The highest weekly gain this week is Tiffany with 721% which is very impressive, but in the end always turns sour. With low amounts, staying alive is the name of the game, breaking even is a good result.

Maybe you could interest a newspaper etc in your exploits and earn extra cash to feed your habit.

 

[adrianallen99]

Maybe they will be interested if I make a million

 

[neil]

Papers print trading diaries

Maybe they will be interested if I make a million

Some guy in the Times once ran a diary of his trades. He would only buy I believe, he was not a trader as such. You could approach them and offer a diary of a spread better or direct access trade or whatever.

Good luck.

 

[dagsyk]

It's a great idea!
I'm new to trading and currently reading Elder's Come into my trading Room. I felt really inadequate when I read " Do not even think about beginning to trade with less than $20000" !!

 

[JonnyT]

Elder is right, you need a good amount of capital before you can even consider trading for a living.

JonnyT

 

[chump]

I have not read Elder so I don't know the context of his statement.However, I would have thought the crux is not whether you can trade with less than $20,000,but rather what are the criteria underpinning your trading. Are you doing it to meets current living costs, to gain experience for future trading, or what ?
Certainly if I was starting out to trade ,but did not need proceeds or capital for liquidity then that is totally different as a situation to that where you have no other means of support and in those circumstances you can commence trading with a lot less than $20,000.

Context is important..

Cheers

 

[kevin546]

Adrian

I would think when you trade with a small amount of capital discipline as always must be high on the agenda. A trading plan that follows low risk and you do know what you want from your deal. One of the things that helped me on my way was to accept small wins and small total gains for a session. When you view the market in terms of a playing field where you can take something from it each time you visit then your capital growth can expand. When you set unrealistic goals that is when positive deals turn sour.

Where you only have small capital then keeping it safe so that you are still in the game next year you need to have a proper trading plan and during the early stages of your trading you risk a very small % of your capital. That way if things dont quite work out you do not lose to much to quickly before the novice becomes more experienced. I am a day trader of the FTSE and tend to trade the morning only I look to obtain 20 points but do not care if it is less or more. Another point I am happy to take a loss provided it meets my stop policy, in other words if I walk away with a loss provided I stopped when I should have and not let the deal move further against me than I planned for this is not considered a loss but the risk I originally accepted when taking the deal. Stopping a deal is very important as it safeguards your capital.
But I am sure you already know this I have mentioned it for novices its simple really let winner run and cut your losses short.

Kevin

 

[andrewmooton]

I only have £600 starting capital for SBing but I could stretch to £1000.

I'm not looking to make a living at this stage but I did believe that it would be possible to compound my profits untill I had enough in the pot to live off.

Does anyone know if it would be realistic to do this, providing i have a good trading system and discipline?

Andrew

 

[andrewmooton]

Kevin, I know how to cut losses short but I have no idea how your are supposed to let winners run.

Could you explain how to let winners run?

Cheers.

 

[adrianallen99]

Kevin: DIscipline is important yes.

I know you need a lot to trade for a living, although I trade fulltime, I do not use money from trading to live on. In fact I keep the two completely seperate.

On small capital you CAN'T trade for a living. A part time trader Ideally needs £5k and a fulltime trader, trading for a living ideally needs £25k-50k.

 

[adrianallen99]

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 only have £600 starting capital for SBing but I could stretch to £1000.

I'm not looking to make a living at this stage but I did believe that it would be possible to compound my profits untill I had enough in the pot to live off.

Does anyone know if it would be realistic to do this, providing i have a good trading system and discipline?

Andrew

 

[foenne]

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!

 

[kevin546]

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

 

[kevin546]

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