All You Need Is A Chip And A Chair

Question:

I have a small trading account (very small due to some lessons learned the hard way. What is the best way to grow my trading account?

Ray, Tradetown, ID.

 Answer:

Ray, you don’t say how “small” an account you have, but since size description is relative, I assume you mean small compared to what you think you should have. My definition of small would be a trader cannot make enough money on a trade to pay the cost of the trade. If your trading account is this small, there is little anyone can do to help you. If not, with patience and time, you can trade yourself into a larger account.

You don’t say the type of trading you have done to lose your money, but if you trade with an online broker, look for the cheapest broker around, and that would be Zecco.com. The name stands for “zero cost commission,” and for the most part this is true. Other online brokers offer steep commission discounts, and they offer more “stuff’ for your money, but you need to pay the very least you can.

Restrict yourself to one trade at a time. Maximize that trade with your total account, but make sure you protect the trade with stops or options, depending on how much money you have and what type of trading you do. This is a gamble, but like a short-stacked poker player, at some point, you have to go all in to rebuild your stack. One important point here is that like short-stack poker, you have to pick your spots carefully. In your case, trade markets that do well in tough economic times.

Once you begin adding to your account, begin to split your trades, meaning keep some money back from each successful trade so you can make more trades over time. After a successful while, begin making more small trades at one time.

I wish I could be more specific, but I only have what you have given me, and I have assumed much, such as you know how to trade, you have a trading strategy, and you understand the markets you trade. If these assumptions are correct, and you follow this path patiently and diligently, it is possible that you can claw your way back to profits and a larger trading account. I feel confident in recommending this path because I have walked in your shoes. Early on, I found myself asking the same question you have asked me, but back then, I did not reach out to Trader Ed, or anyone else (not even my mentor). I simply corralled my emotions and put the above plan into action. If you want it, it can be yours …

Trade in the day; invest in your life …

Trader Ed