Every traders wants to trade Big with a well funded trading capital of at least 10 lakh but very few are able to achieve this feat. Its often said Making the First Million is the most difficult thing once achieved money will flow in your coffers.
Trading small account is very difficult when compared to account having large trading capital, As such when your trading capital is large traders are buffered against mistakes, unexpected losing streaks, and sometimes even bad traders, but small accounts have no such buffer. When trading with large account trader can test n number of trading strategies in live market but small account we have no such luxury.
In Reality 80% of traders trade with small account from 30K-70K which is just enuf to cover margin of the derivatives traders is trading into. Trading with small trading capital requires “Very Very Strict risk management and money management ” , not having it will lead to Trading account blowout and will throw traders out of market. Trading with small capital, trader has no buffer for unexpected moves in market . Recent crash in Nifty and Mid and Small cap stocks had blown out many small trading accounts. Trading small account single losing trade can make an account untradeable so trades is always under pressure to make a profitable trade. Most traders are unable to bear the pressure and eventually do a trading mistake which ultimately lead to blowout.
As we know most of us are not born rich and we need to devise strategy to trade small account and make it big as time goes by, So here are few cents which can help traders to trade profitably.
- Take Risk Averse Trade: Do not jump in a trade because you think that market has hit absolute bottom, Most of traders try to jump the gun and take trades thinking market/stock cannot go down more than this. When we are trading with small capital we have to make sure we go for trade having good Risk to Reward ratio and trading on intuition is strict no no . I know many traders who blindly took IVRCL, Rel Infra, Financial Technology thinking these stock cannot fall further but alas they kept sinking like a broken ship. So its always better to avoid to take trade against the trend and stick to traders having High Risk to Reward Ratio.
- Do not take Excessive Leverage -Excessive Leverage is another major reason for small account blowout. Trader having capital of 50K use 10-15 Time leverage to take big trading bets in intraday , a single bet goes against you, 20-30% of account size can get eroded. Always remember losing 50% of your trading capital , to recover back again you need to make 100% . So aviod excessive leverage. Always ask yourself a question before taking any leverage trade What if the trade goes against me ? Will i be able to sustain another day ?
- Adhere to the One Percent Risk Rule – Trading in accordance with the one percent risk rule provides a small account with the same buffer (against mistakes, unexpected losses, etc.) as a large account. Many professional traders abide by the one percent risk rule regardless of the size of their trading accounts, because it is a very effective risk management technique.
- Trade using a profitable Trading system, Have a trading plan before your trading day starts and always be in high spirits if things does not work as you have planned.
Some traders adamantly state that under capitalized trading accounts cannot be traded successfully. This is not true. Small trading accounts may be more difficult to trade successfully, but if they are traded correctly, there is no reason why small trading accounts cannot be profitable.
By controlling the stress that is often associated with under capitalization, focusing on risk management, and correctly applying their risk management techniques (especially the one percent risk rule), small account traders can make a good living from their trading, and may be able to turn their small account into a large account.
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Venkatswara rao,
If you really want to make money in the stock market, please follow Three Monkey disciplinary rules of Mahatma Gandhiji.
Never Hear evils,
Never speak evils,and
and Never watch evils.
When you are taking trade with your own achieved knowledge with self confidence, then why to hear any one else or why to share it with any one else? Be bold enough to accept the market whatever may be the result and avoid to view all such blue channels and media, even sometimes friends also. Then and then you will create and develop determination power of your own. Never be a dependent to any one. Yes, you watch TV, read newspapers etc but only for news only and not for your trades. Ignore the levels that are discussed in public. Then only you can control your emotions. Of course this requires some time. But it is possible in due course of time. The only thing is to have patience for that and in the long run you will be definitely benefited with this practice and market will reward you surely.
Gauresh sir, U r 100% correct. As our Mentor Bramesh said I agree openly I am also one amongst aove mentioned loosers. Only because of not having technical knowledge some loose 50% OF CAPITAL. And because of stress , I commits some mistakes. Eg:, entering in wrong time and waiting long time during loosing time , exiting just before reversal. No sooner this ilfated middle capital people exits the trend reverses, making fingeres crossed for coming out of that position. This will be repeated again and again since we forget what we experienced days back . The blue channels also do not discuss why market is behaving abnormals on a particular days.
Thank u Bramesh for giving caring about low profile, middle capitalled traders. Please save with some more lessons.
@ Al,
Please read 280000 instead of 2800000
and 1120000 instead of 11200000…….it is typing mistake
sorry for that.
yes, Bramesh you are absolutely right.
In fact a trader having very small capital expects too much return from the market. Nowadays mostly trades wants to earn more than 10k per month by employing only 50k-60k, and because of this high expectation they are tempted to use more and more exposure given by the broker. Ultimately they lose their entire capital fund within a blink of eyes. At last the whole process is converted into gambling. In fact, a trade taken in future segment itself is leveraging and by using exposure given by broker raises the proportion of leveraging. In case of Nifty, margin money is around 30k-35k and by employing this much margin a trader can hold position of Nifty worth more than 2800000. Now if the same trader is allowed to use four times exposure, he will hold position of nifty worth more than 11200000/- and this creates too much risk which a small trader does not understand. Why he is doing so…? Simply because he wants to earn not only more money, but want to earn money very fast and speedily. And this psychological factor proves to be harmful to him.
In fact a trader must have sufficient capital funds which can achieve his expectations sooner or later….or else must keep his expectations at such a level that can be achieved sooner or later by employing his limited funds.
If a trader draws a demarketing line between trading and gambling, then and then he can make money surely and easily.
Thanks a lot Gauresh Sir for this elaborate and wonderful explanation.
Rgds,
Bramesh