why is trading easier if u have a large account?

whitewolf

Junior member
15 0
I'm really trying to understand why trading is considered easier if you have a large balance..

is this because of the percentage that u need to risk to make 'decent' returns is lower? but surely its all relative right?

or is this because u can leave larger stops and close trades earlier?

I've no idea so sorry for the newbie question...

love & success
 

0007

Senior member
2,376 660
You do need to be sufficiently capitalised but I would seriously question the premise that having a large account makes trading easier. Of course, -- it also depends on what you mean by a "large account ". Having a large account brings to mind the old saying "the quickest way to make a small fortune on the stock market is to start with a large one".
 

tar

Legendary member
10,443 1,313
Definitely easier if you are targeting a fixed $ monthly income , for example you can live with 2K a month , now if you want to make a living with 10K then that is 20% monthly gains needed which is not easy , however if your account is 100K then you just need a 2% gain a month which is quite achievable - technically - , assuming you know how to trade profitably , plus with a big account you can afford to trade exchange traded futures more comfortably compared to a small account ...
 
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0007

Senior member
2,376 660
Definitely easier if you are targeting a fixed $ monthly income , for example you can live with 2K a month , now if you want to make a living with 10K then that is 20% monthly gains needed which is not easy , however if your account is 100K then you just need a 2% gain a month which is quite achievable - technically - , assuming you know how to trade profitably , plus with a big account you can afford to trade exchange traded futures more comfortably compared with a small account ...

Good points. I was thinking along the lines of how easy it is to be "successful". Reinforces the thought that your capitalisation has to be appropriate to your circumstances.
 

tar

Legendary member
10,443 1,313
Good points. I was thinking along the lines of how easy it is to be "successful". Reinforces the thought that your capitalisation has to be appropriate to your circumstances.

I'm sure that undercapitalisation is one of the main reasons why retail traders don't make it , however starting trading with a big account is not really a blessing !
 

Vasco da Banana

Established member
699 121
I'm sure that undercapitalisation is one of the main reasons why retail traders don't make it , however starting trading with a big account is not really a blessing !

No, it'll almost certainly result in a more painful loss when the inevitable happens and the account's blown
 
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whitewolf

Junior member
15 0
some good points here,

I just keep hearing people say trading is less risky with a large account and want to get to the bootm of that statement..

It seems to me that if your trading a micro account then say £500 is a reasonable amount of money to begin with, the broker I use offers stakes between 5p-£1 per pip..the spread is 1-3 pips..so with this in mind I can't see any reason why a normal sized account would have a better chance of success..

i'm quite new to the scene (trade mainly indices) but have learned alot in the past months..i'm looking for 6 months of consistent profit before even considering a normal sized lot account..

love & success
 
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cablemonster

0 0
Someone with a large account is more likely to be financially secure. When you are learning this makes a huge difference believe me. It frees up time to focus on the task in hand. Perversely the more desperate you want to make it as a trader the harder it is imo. If you dont have to worry about monthly income whilst learning it makes things easier but as always there are no free lunches. The psychological pressures of trading are also less with more money behind you. My 2c
 

Brumby

Established member
593 139
The term easier is probably not the best choice of word to describe the advantage of having a larger account. One of the important pillar of trading is risk management and managing draw down relative to potential return. Having a larger account provides flexibility structurally in able to execute (i) multi tier strategies; and (ii) pursuing profit taking strategies.

In the former, markets we know either consolidate or trend. Each state of the market requires different trade strategies. The most difficult trading condition is when a market transition between states. Having the ability to adopt multi tier strategies enables the smoothing of the equity curve but would require an account size that can handle concurrent strategies.

In the latter, being able to adopt multi lot size allows the flexibility to pursue scaling in of profits and letting profits run. It requires an account size that provides the required flexibility.
 
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cablemonster

0 0
What I have found out is that most people have a monetary income figure or threshold per month that is meaningful to them. What I mean by this is a figure that if achieved monthly would make a substantial material difference to the traders quality of life. Of course this amount depends on the existing income and capital position of the trader and how expensive their tastes are. It also has to be satisfactory compensation for the traders time. Time has opportunity cost. For example some people spend 2000 hours learning to trade and give up. This is a huge chunk of time that could have gone towards learning a profession for life eg. Lawyer, accountant, etc. So what about this figure. For me personally this figure is 4k per month or 1k per week. Thats just me though others may be less others more.

Why does this matter? Because if you have a smaller account you need to take more risk to achieve your meaningful figure and your inner self will not be satisfied until you achieve this figure. The smaller your account compared to your meaningful figure the more likely you are to blow out and deal yourself psychological pain.
 

robster970

Veteren member
4,566 1,390
D70 had it right in a different thread (although I seem to recall it being in here for some reason) - if you are adversely affected by the size you are trading, you are trading to big a size for the account.
 
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Rambo35

Active member
227 6
While I do think you need to have sufficient capital, I do not agree that it is easier. You need the capital so you can manage an account and execute a strategy which in my opinion is not possible with $100 or $200 etc. The actual amount varies from trader to trader. Some would argue that with more money you have bigger problems. I execute my strategy and naturally my account grows over time.
 

Dameon

Junior member
31 1
Severe under capitalization especially for new traders is a big barrier. Apart from learning how to trade and managing risk, a rare aspect that's oftenly missed is expectation management which contributes to risk relativity for different account sizes. Just to be realistic, if you need $ 5000 monthly, then better have at least $75000 in your account. Just like in any other profession, you are only paid about 10% of your input and trading is no exception. I don't see the sense in earning $1000 from a $2000 account...Do you?
 

Dinos

Veteren member
4,112 713
I'll look at it from a different perspective, my account balance is sufficient to withstand 20 consecutive losses, my largest cumulative loss is 3, experience has taught me, l only need sufficient capital in my trading account to enable me to execute my trading plan.

So lets say for arguments sake, if I traded 1 CFD @ £6.50 per pip, the margin requirements would be £150 per trade, thus meaning a relatively small capital balance of £3000 to fund my plan. What's the point in having more money sat in account if I'm not using it.

Just a different perspective, sure it will get slated, but over 10 years as a full time trader, it served me very well.
 
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