This content provides practical advice for new day traders with small accounts, focusing on strategies to grow capital efficiently and sustainably by optimizing risk-reward ratios, prioritizing consistency over high profit percentages, and managing risk per trade.
Mind Map
Click to expand
Click to explore the full interactive mind map • Zoom, pan, and navigate
So, your new to day trading, and you have a very small amount of money in your account,
and you want to grow it as quickly as possible. I get it, not everyone has $10,000 to start
off with. That s why in this video, I m going to show you how to trade with just a small
starting amount of $100 and grow it efficiently into a thriving stock account. Let s dive
straight into it. The first topic we are going to talk about
is how to get the most out of your risk to reward ratio. So here we have our chart. The
red line is our main support. It s very strong and price has bounce off it multiple times,
making it very reliable, and will have similar tendencies in the future.
The white line is acting as our resistance, and somewhat of a weak support. This is because,
you can see the price resisted off this line a couple times, and even bounced off it once
making it a weak support. The green line is our profit mark. We got
this line by going on the daily time frame and finding a key level of resistance.
Now that we know what all these key levels are. Now think to yourself what you would
do. Where would you enter the trade? Where would you set your stop loss? These are all
some questions you should be asking yourself. Now what I see a lot of beginners doing is
they will do the obvious, and that is, they set the entry point right above the white
line, and they set their stop loss, below the strong support. Then of course, they set
their take profit target, at the strong resistance, giving them a 2.86 profit ratio.
Now, as I m saying this you might be thinking, well I don t see anything wrong with this
strategy? The key concept this specific trader is missing, is the concept of getting the
most out of your risk reward ratio. So this person is getting $2.86 dollars for every
dollar they risk. Which isn t bad, but it could a lot better. Let me show you how.
We are going to keep the exact same support, resistance, and take profit line. The only
thing we are going to add to this strategy, is a little bit of patience.
Once of my favorite quotes in trading, is that trading is patient people, taking money
from impatient people. And it s so god damn true.
Instead of entering when the price breaks through our white resistance line, we are
going to wait for a pullback to happen and bounce off our line
You might be saying yourself, why would we wait for a pullback if we are entering at
the same exact price anyways? The answer, is taking advantage of your risk
to reward ratio. We are not able to set our stop loss below
the white line. Because, there is not enough key point to make this a strong enough support.
Sure there is a couple, but not enough to make it a strong one.
But if a pullback happens, and bounces off the white line, we can now consider that line
as a strong support, and set our stop loss below that, rather than the red line.
Let me show you what I mean. So instead of enter when the price breaks through the white
line. We are going to be patient and wait for a pull back to happen. We wait a bit,
and see a pull back occurs. This is extremely good news, because 1, the price respects this
new level and bounces off, and 2, creates a couple more key points, making this a more
reliable level. Why this is important, is because we can now
raise our stop loss below this level. We were not able to do that before, because it was
not strong enough. But now that we see its reliable, we can do
so. We now have our stop loss below the white line.
We are going to keep our take profit (the green line) at the exact same spot.
Now, the next thing you might be asking is alright, we moved our stop loss up, whats
the big the deal . The big deal is, now that we raised our stop
loss up a considerable amount. Instead of having a 2.86 profit ratio, we now have a
6.38 profit ratio. Almost 3x the amount we had before.
So now we are getting $6.38 for every dollar we are risking compared to $2.86.
Even though we are making the same amount of money as were before, considering that
we didn t move our take profit. We now have a way higher risk to reward ratio, which will
help us so much in the long run. I know it s a slightly confusing topic, but
it s such a crucial thing to understand, when you first start trading. And will definitely
payoff throughout your trading career. The next crucial tip I want you to understand,
is the powerful concept of knowing how much money to risk per trade.
I see all these financial gurus on YouTube or Wallstreetbets, telling you ways to double
or triple your account within 24 hours. While the profits may seem very glorious and
heavenly. Profit percentage is not everything. It s all about the amount of successful quality
trades you make. Let me show you an example.
So Trader 1, is the YouTube guru that I was talking about before. We gave them a starting
balance of $100. They have a profit target of 20% per trade, which is one not only risky,
but you are going to find way less trades like that per month. So in this example, I
have them taking 6 trades per month. So this is saying if all 6 of trades were
successful, which I m not even including any risk, and even finding 6 trades a month with
20% profit is pretty hard, but we ll give them the benefit of the doubt. This specific
trader would have made $298. Then we have trader 2. We also gave them $100,
but we are setting their profit target at 2%. This is not only way less risky, but this
trader will be able to complete a lot more trades. So, this trader was able to find 150
successful trades per month, because the profit target was so much lower, and doable.
Even though trader 2 s profit ratio was 10x lower, they still made $1,950.
The key concept I want you to take away from this, is you shouldn t be worried about how
high your profit percentage is, you should be worried about consistency, and the amount
of successful trades you can accomplish. My third and final concept I want to share
with you guys to help you grow a small stock account has to do with risk. Let me explain.
So going back to the trader who risks 20% of his account per trade. Even though they
would make 20% if they won, they are still risking 20% if they lost. If you are risking
high amounts of money per trade, you are better going off to a casino and gambling, because
that s basically what you are doing. If you truly want to grow your account, you
have to aim for longevity and consistent profits. The reason trading with high risk is a problem
is because of consecutive losses. I don t care how good your trading strategy
is, every strategy is going to have consecutive losses. If you have 5 to 7 losses in a row,
and your risking 20% per trade. Your portfolio is going to go down the gutter quick.
This is exactly why it is recommended that you risk 1% to 2% per trade.
Let me show you why This a trading simulator.
So, in this example we are going to start with $1000, have a win probability of 60%,
have 2 wins for every loss, take 500 trades, and finally we are going to risk 20% per trade.
The key stat we are looking at, is the biggest max drawdown. If you take a look at this,
if we were to risk 20% per trade, we have the potential to lose 86.5% of our portfolio,
GONE. Which is absolutely crazy. Could you handle an 86.5% drop in your portfolio? And
that s just with 20%. Let s see what 50% looks like. Now take a
look at the drawdown 99.2% of your portfolio. GONE
But take a look at if we just risked 2% per trade. The biggest amount we could loose is
9.7% of our account. Now, if you want to double or triple your
account within a week. You are not going to get there with trading 1-2%, or even 10%.
You have to risk a lot, to get high returns like that.
I realize that not everyone has the same risk tolerance. Some of you may have a higher risk
tolerance than others. Some of you may have more money to risk. That s ok.
But if you truly want to grow your account efficiently, are in it the trading game to
make consistent profits, and are in it for the long haul.
It has been statistically proven that trading with 1-2% of your account is the best way
to do that. If you are only risking 1-2% you can handle
a lot more consecutive losses compared to the 20 or 50%
When I m trading I want the math to work with me, not against me. That s exactly why I and
many others use the 1-2% trading strategy. I just showed you 3 different tips to help
you grow a small trading account. All I ask in return is if you take 2 seconds out of
your day and like this video. If you want to grow a small trading account
your going to need a good trading strategy. Well good thing for you, I made you a video
where I show you an insanely profitable trading strategy, that is proven to work.
Go check that out! Thanks for watching, and ill see you guys, next time.
Click on any text or timestamp to jump to that moment in the video
Share:
Most transcripts ready in under 5 seconds
One-Click Copy125+ LanguagesSearch ContentJump to Timestamps
Paste YouTube URL
Enter any YouTube video link to get the full transcript
Transcript Extraction Form
Most transcripts ready in under 5 seconds
Get Our Chrome Extension
Get transcripts instantly without leaving YouTube. Install our Chrome extension for one-click access to any video's transcript directly on the watch page.
