How to Start Small and Become a Successful Trader – Introduction
I often interact with people who want to be successful traders. The most common challenge I hear from them is that they don’t have enough money to trade. I had a similar problem as well and I understand these concerns. In this article, I will highlight strategies that you can use to become a successful trader when you have limited capital.
- Gain knowledge
Knowledge is the most important resource that you can have as a trader. You can have all the money but without knowledge, chances are that you will lose it all. I have seen people start their trading accounts with more than $10,000 only to lose it within a short period of time. Even before thinking about the money that you have, you should focus on gaining the knowledge and expertise to become a better trader. This knowledge should come from books, videos, and the practicing that you do.
- Start Small
When you have become an expert in trading, you should start small. Good thing is that you can start trading with less than $500. There are many companies that provide brokerage services which you can use. If you have studied and created a good trading strategy (that you have backtested), you should start with the money that you have. When you are trading with little money, you should ensure that you use very small lot sizes. Doing this will ensure that you minimize the amount of risk that you take for your account. Of course, the amount of money that you can make with these lot sizes is not very much, but it will prove your point.
After trading with your account successfully for a long time, you should now start to fundraise to get more money. By fundraising, you will be able to get more money that you can trade with. However, no one will give you money to trade if you don’t have credibility in the market. That is why the second stage above is very important. For instance, if you started a trading account with just $500 and traded until the account reached $2000 within a period of more than one year. With such a track record, you can approach investors who will invest in you. You should start fundraising from your family and friends and then moving to other people who might be interested in your fund.
- New responsibility
As you will realize, trading with your own money is more fulfilling than trading for other people. This is because when trading for yourself, you have total control. You can decide not to trade for a week and no one will question you. However, trading for other people, although it will make you more money, has its challenges. For instance, you must always update them on what is going on in the market. You must also ensure that you don’t lose money for your investors. This is the hard part. To prevent the risk of legal issue in case the money is lost, you should ensure that your investors agree to take any losses.
Finally, you can decide to continue investing for other people or to switch gears to investing for yourself now. This assumes that you have made good money for yourself. I advise that you return money to your investors and trade using your own money only when you have made good money. Returning money will remove the pressure that you have when trading. Alternatively, you can return the principle that investors gave you and then you can continue trading for them with the profits that you have made. This is also a new way of removing risks and pressures of losing money.
How to Start Small and Become a Successful Trader – Useful Links:
- Another useful reading on Investopedia