How to grow a small trading account
Author: adam
Compiled by: TechFlow
Before we get into the details, it is important to remember that trading is a complex and high-risk activity.
There is no method that will allow you to quickly grow your account in a short period of time without experiencing any losses.
In fact, those who are able to grow their accounts quickly often do so by taking great risks, even close to going all out.
The point of this article is not to tell you to be patient and wait for ideal market conditions, nor is it to teach you how to analyze the market in depth.
On the contrary, I will share some methods to help you achieve rapid account growth while reasonably controlling risks.
If you are not yet familiar with basic concepts such as 'risk management', I strongly recommend you first read this article on risk management.
Why choose to trade in niche markets?
If you mainly trade BTC, ES (S&P 500 futures), major forex pairs or gold,
You will be directly competing against retail traders like yourself, as well as large institutional players, quantitative firms, etc.
This is mainly because these markets have extremely high liquidity, allowing large capital players to easily participate in competition.
while trading these markets is not impossible, if you do not have sufficient capital, you will actually have more advantages in lower liquidity markets.
For example, many altcoin derivatives, NFTs, or on-chain tokens are not very attractive to large players because these markets lack liquidity to meet their trading scale demands.
When I began to study the altcoin market more deeply, I often found the clearest trading signals in markets with lower liquidity.
At first, I was very confident in these 'low-threshold' markets, but when I tried to execute large positions, I found that my orders appeared very conspicuous in the order book, which made me realize the disadvantages of low liquidity.
However, for small account traders, this issue does not need to be overly concerned about, as this liquidity problem only truly impacts you when your order size reaches high five or six figures.
Taking Lina on Velo as an example, the chart shows that potential breakout signals for Lina could already be observed a few days before the breakout occurred.
Such opportunities can bring significant returns, but we also need to consider the potential risks.
By checking Lina's trading volume and open contract data on the Laevitas platform, we can find that before the breakout occurred, Lina's daily trading volume was 16 million, and open contracts were 4.5 million.
If this trade fails and you hold a large position, your stop loss may lead to actual losses far exceeding expectations due to slippage. But for traders with small accounts, their position size is smaller, and stop losses can often be triggered close to the invalid point, so they won't face this problem.
Low market cap alternatives to derivatives are not the only things you can participate in. On-chain tokens or NFTs are also viable options.
When trading, the most important thing is to be aware of where the 'meta' currently is.
For example, NFTs were very popular a few years ago, but they have since died out.
You need to understand the speed of information dissemination in this field to avoid taking unnecessary risks, while also not missing out on significant gains due to premature selling.
On-chain trading is very challenging. Although you may see many success stories on platform X, in reality, the chances of increasing “1 SOL” to “1000” are very low.
In on-chain trading, there are some unique strategies to use, such as tracking different wallets, analyzing position distributions, or simply relying on common sense to avoid tokens heavily promoted by KOLs.
Besides that, you will find that using simple support and resistance levels or trading indicators is usually sufficient to handle trading, especially for those tokens with larger market caps and lower risks of running away.
Day trading
Prices exhibit fractal characteristics. This means that if I show you a chart, you may find it difficult to determine whether it is a daily chart, a monthly chart, or a 5-minute chart.
Additionally, for markets with high liquidity, if you are not familiar enough with them, it can be difficult to discern which specific market it is.
For example, the above shows the 5-minute chart of XRP.
If you choose swing trading, the trading frequency will be relatively low. Even if profitable, most of the time you are just patiently waiting for opportunities, which usually only appear 1-2 times per week in each market.
I will discuss swing trading in detail later, but day trading is different; it provides immediate feedback with numerous small fluctuations to operate on each day.
Therefore, if you engage in day trading and execute a few trades during each trading session, theoretically, your account funds will grow faster.
However, day trading is one of the most challenging areas of trading. A slight distraction or a tiny mistake can cause you to lose all your gains in just a few minutes, just as quickly as you made money.
I recommend that every beginner trader try day trading, as it allows you to quickly receive market feedback and accelerate the learning process.
One major advantage of day trading is that you can focus on markets with higher liquidity, making trading scalable. If you focus on BTC, ETH, ES, NQ, gold, or major forex currency pairs, you won't face limitations on position size.
Nevertheless, day trading is very difficult and not suitable for everyone. It requires a high level of focus, quick decision-making, decisive stop-loss actions, and various other skills.
Therefore, it is very important to formulate detailed trading plans and strategies for each step. Once you enter a trade, emotions may affect your judgment, and that's when the plans you've prepared in advance will come in handy.
There are many methods for day trading, such as operating through price trends, order flows, news, technical indicators, etc. Each method has its applicable scenarios, and there is no absolute superiority or inferiority.
If you are interested in my day trading and swing trading methods, you can check out Tradingriot Bootcamp, a training course specifically designed for traders.
Using others' assets for trading
In recent years, the online funding company (prop firm) sector has developed rapidly.
If you are encountering this type of company for the first time, you need to pay the evaluation fee first and comply with the trading rules in the demo account to gain access to the funded account.
This model allows you to trade with larger capital, and the only cost is paying the evaluation fee.
However, if you are not familiar enough with trading, you are likely to waste money due to frequently paying evaluation fees, yet never obtaining a funded account.
Although funding companies often spark controversy, I believe that for those who have trading skills but lack capital, this is a very good opportunity.
As this field rapidly expands, choosing a reputable and stable company becomes particularly important. In recent years, we've seen some companies refusing to pay profits, setting rules that are almost impossible to meet, and even going out of business directly.
Here I may be somewhat biased because I am directly involved with the Breakout funding company. But if you focus on cryptocurrency trading, Breakout is a very good choice. It offers daily payment services, has never denied payment, and its evaluation rules are also very reasonable.
High time frame analysis with low time frame execution
If you find that day trading is not suitable for you, do not be discouraged. This method can also help you quickly grow your account funds while being easier to operate.
In fact, this method is not limited to small accounts; I personally have completely shifted to this trading style because I no longer want to spend a lot of time staring at charts.
Nonetheless, I still want to emphasize that my experience in day trading over the past years, studying different futures markets, and understanding market microstructures has been very important for me, and I am glad that I have gone through these.
Although we mentioned that prices exhibit fractal characteristics, key points on high time frames such as daily, weekly, or monthly charts often produce a greater market reaction than points on a 1-minute chart. This is because more traders and algorithms will pay attention to these key points on high time frames and act accordingly.
For example, at the end of February 2023, Solana rose to the daily resistance level and then retreated to the next daily support level. If a short position is established at the daily close with a stop loss based on 1-day ATR, a risk-return (R) of 2.5 times can be achieved in 18 days.
Of course, achieving 2.5 times the return in 18 days is quite good. But if your account is small, for example, risking $100 per trade, then earning $250 in returns may not be exciting; in contrast, if the risk per trade is $10,000, making $25,000 in profit seems very considerable.
If you want to quickly grow your account capital, you can switch to lower time frames while following the trading ideas of high time frames (HTF). This means your goals remain unchanged, but by executing trades on lower time frames (LTF), you can narrow the stop-loss range and thus increase position size.
You don't need to switch to 1-minute or 5-minute charts; H1 or H4 time frames are sufficient. Focusing too much on low time frames may increase risk-reward, but also significantly raise the risk of being shaken out before the market starts.
If you choose the H1/H4 time frames, it is still possible that you may not find ideal entry points or may be stopped out before the market starts. But in my experience, giving high time frame trading ideas 1-3 attempts on low time frames usually yields better results than solely relying on daily charts.
Conclusion
Trading is not easy; it requires time and patience. But as long as you manage risk well, even small amounts of capital have the chance to gradually grow into large amounts.
In trading, always try to think outside the box, maintain patience in execution, and formulate a comprehensive trading plan.