Beginners Forex Education Forex Basics

Pros and Cons of Trading with a Small Account Balance

When we talk about retailers, one of the biggest differences between them and professional traders, as well as institutional traders, is the size of the accounts they handle. This creates huge differences in the way these traders will address their situation, but at the end of the day, the math shows us that the differences between these types of accounts should not be exceeded.

The Reality

We are not trying to dissuade any reader from negotiating, but you should know that there is too big a difference between a trade of 10 million USD account and a $100 account. As information, the average retail account in the United States is located somewhere near the level of $2000, and I suspect that in other countries it is much smaller. This is because the Forex is sold as a “scheme to get rich quickly,” by layers and layers of people who have an interest in taking their money, one way or another.


But the reality is that it is true that you can create a lot of money faster in Forex markets than in other markets. This is due to leverage and the fact that markets tend to have a very long-term trend. And indeed, it is very common for a currency pair to have a trend of three years at a time. However, mixing that with leverage is both a good thing and a bad thing. Trading with a small account

The Advantages

Let’s start with the advantages of trading in a small account. The most obvious benefit of trading with a small account is that you don’t have to worry about turning the market against oneself if go in and out of it. If you are trying to close a 10,000 unit position, you will have a lot of trouble doing it at any price. However, if you are trying to exchange a position of 100 million units, it is a completely different situation. Indeed, the retail trader has considerably more flexibility when putting or removing a position.

Another advantage is that if you remove it, it should not be a crucial mistake in life. After all, the average person who is trading forex can handle being deleted from an account if it is small, but again, the biggest problem you will have will be related to your financial situation. For example, if you have a net value of $3000 at the time of trade and have an account of $1000, that could cause a problem. In this sense, the declaration of a “small account” is reduced to an individual situation.

Another great advantage of trading a small account very often is that they will have a greater amount of leverage in your Broker. In that sense, it gives you the opportunity to make more money with a small stake, but the problem is that, of course, high leverage often leads to large losses. However, again, that said, if you’re risking a few hundred dollars and making no difference to your livelihood, that risk can be advantageous.

The Disadvantages

There are a multitude of disadvantages to a small account. The most obvious one is that it will be difficult to make the rewards worthwhile. For someone who earns $100,000 a year, it won’t be exciting to win $100 at the end of the same year through trade. This comes down to just having more patience, and whether or not you know how to drive. Most of the traders I know don’t. This is why many of the small traders end up having big problems, as the lack of a significant reward makes concentration difficult. This leads to over-negotiation or over-exploitation of their position.

If your account is too small, you may not be able to determine whether the storm is a major setback or a period of time that presents much volatility. This is because your losses must be too small. Beyond that, you will most likely continue to love yourself too much, thinking about things as follows: “I just need a couple of crazy trades, then I can do trading normally after I have increased my account a little”. To say, this is bound to be counterproductive, as the emotions of seeing a big change in its profit and loss section will make you make decisions that will usually be bad for your business results. Even if you get that sudden explosion and the ability to make a massive game, it is very rare that a trader can reduce the size of his position after winning like this. Greed finally takes over, and then the broker gets all his money.

The Solution

Obviously, you’ll do much better with a bigger account. If you think this way: if you win 1% on a $10,000 account, that’s $100. That is much more sustainable and is likely to happen than trying to make a 10% on a $1000 account. So the solution is obvious: Trading with a larger account. No, I’m not kidding.

The way to get to larger account sizes is something most people don’t want to hear, taking their time. You can create your account in a gradual and responsible way while adding it along the way. Maybe I can put $100 a week into your account to fill out the balance. Finally, you can find enough commercial capital to make a difference. That’s the biggest problem most traders face in trading markets, they just don’t take the time to make it all work. After all, your retirement accounts, which are managed by professionals at large firms, seem fine for you to earn 10% a year. However, like retail traders, we expect to outperform many of the professionals who have huge advantages over us. Commercial capital is crucial, so you must first worry about preservation and then add it once you show that you are able to make a profit.

It’s probably not the word you’re looking for, but the reality is that operating with a small account is very difficult.


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