Transitioning out of a $10,000 account can be difficult. Learning to adapt to a smaller balance can be rough for many. What a smaller account size does offer is a new perspective on risk and a way to adapt your strategy. Apiary Fund reviews how traders are able to manage a larger account size and a smaller account to analyze the risk management implementation in both cases. Learning how to adjust key parts of a strategy for account size is critical in trading.
When it comes to trading, there will be wins and there will be losses. And when it comes to trading a personal account, there may be a need to withdraw money from your account for a down payment on a new home, new car, for kids’ college, or many other reasons. Once you take out that money, is your plan to stop trading until you can save it some other way and then deposit it into the account again to pick up trading, or are you going to trade the funds back? This is why knowing how to utilize a smaller account size matters.
The first thing to remember is that if you trade a 0.1 lot on a $10,000 account, that doesn’t automatically correlate to a 0.01 lot on a $1,000 account. Looking at a strategy from multiple perspectives needs to be done when adjusting your account balance. Does this strategy require varying lot sizes? Does this strategy require multiple trades to be placed? If a variable lot size is used in a strategy, that has to be taken into account.
One common issue that arises in account changes is that the trader will pick up the new account as if nothing has changed. This can stem from two primary thoughts. First, is just that the trader is used to a certain size account, and when that changes, it can take time to adapt to the new size and not being able to place the same size trades. Always checking your balance when you sign into your account is one of the best ways to prevent this. Double-checking your balance before you trade will show you if any trades closed, how much they closed for, and also can prevent issues from inaccurate balances. As much as everyone wants to think that it may never happen to them, technology has flaws. There can be a miscommunication with servers and accounts that result in balance issues. Getting in the habit of always checking will make those issues to check for and always make it so you know what you're trading.
The second reason you will see people trading as if they have the same account balance is they're trying to get back to that account size faster. The thought that goes through most people’s minds is that if they adjust their trade quantity to a lower value to account for their lower balance, it may take two months to get back to where they were; but if they keep up the trade size they were using, it will only take 3 weeks to get back where they were. Now, if take profits are the only method trades are being closed out by, that may be the case. However, with a lower balance in the account, margin calls and risk rules may be hit more frequently and trades will be closed for larger loss percentages than accustomed to, which can take longer to recover from.
Apiary Fund reviews strategies and how to utilize them in different account sizes. Even Shawn Lucas will do videos from time to time such as the “Wobbling a $2,500 account” video discussing the Wobble technique that you can watch here. When your account size changes to a lower amount, take time to adapt and experiment a bit before jumping straight in. And when your account balance grows to a larger number, make the transition gradual as to not lose a significant chunk of your new balance right away.