Imagine you’re a trader. You want to make money by buying and selling stocks. You think you have what it takes to beat the market. But you’re wrong. Very wrong. Because according to some sources, 95% of people lose money in their first year of trading, and 70 to 80 per cent quit trading altogether within the first two years. Why? What makes trading so hard? And what do the 5% who succeed know that you don’t? When I started trading many years ago, I learned one thing, one very important thing, that kept me going in this business. And that one important thing was my account size. I started with the smallest amount possible, just $10. Did I make a fortune out of it? No way. I lost it all in no time. Then I tried again with another $10 and lost that too. And again. And again. Until I learned something that made me stop losing money so fast. In this video, I will tell you the 5 important things I learned after losing many small accounts and how they can help you avoid making these mistakes and become profitable in the long run.

For the love of god, use a small trading account!

One of the Patreon supporters asked how they should start trading.

I recommended starting with the minimum account size possible on their broker.

Why is this so important? Well, for two reasons. One, because this way, if you ever decide to stop trading completely, as many people do according to data, you will not be one of those people who regret losing a lot of money in the financial market.

The second reason why this is so important is that when someone blows up their account, they most likely learn something very important: they find out the reason behind why they blew up their account. Whatever the reason is – whether it’s overtrading, chasing losses, or breaking the rules – they simply have to stop doing that again.

But if someone starts with too much capital and then blows up their account, it doesn’t matter what they learned from blowing up their account because now they don’t have enough money to trade again. They have figured out the secrets to not losing money, but now they don’t even have a good account size to use those secrets.

If they start trading again with the same or less capital, they will always think about their previous loss. Recovering from this big loss will always be on their mind. This is a recipe for disaster. It’s basically revenge trading, and as everyone probably knows, you can’t survive trading if you are revenge trading.

We, humans, are not very good at finding solutions, but we are very good at identifying problems. That’s why I decided to start my trading journey with the smallest account size possible. There were two main reasons for this. One, I didn’t trust the broker I was using at the time. It was a foreign unregulated broker with sketchy reviews and unclear legal status. Two, I wanted to find out why 90% of traders lose money in this business. You see, if you can identify the problems that cause you to lose money, which we humans are very good at doing, you can simply avoid making those mistakes. And what you will be left with is the solution to your success. That was my whole idea behind this experiment. As I have told you before on this channel, I did a lot of tests and experiments, eliminated what didn’t work and kept what worked best. That’s how I came up with the strategy and the reward-risk ratio that I recommended in the very first video on the Trading Rush channel. And they are still the best overall, according to data. So when you start with a small account size, don’t think about making money right away. Think about what makes you lose money instead. Write down your mistakes and simply stop doing them. I know this sounds easier said than done, but most of the mistakes you will write down will be so silly that you will wonder why you ever made them in the first place. It’s just that many beginners realize them after blowing up big accounts, which is too late to recover from. I will show you some of these mistakes soon.

You know, I’ve been telling you that you should start trading with the smallest account size you can afford, but that’s only going to help you figure out your mistakes. You will probably stop blowing up accounts, which is better than what 90% of traders can do, so good job. But to actually grow the account in the upward direction instead of a downward direction, there is a minimum account size you will need. It’s 50 Jabillion dollars. Just kidding. It’s around 50 dollars. These days, many brokers will let you take trades with very little money. My first broker many years ago let me place a $1 trade with a $10 account size.

I remember one time I saw a less popular pair move like this. The price was going nowhere fast, just bouncing up and down in a narrow range. So what did I do? I bought every time it went down and sold every time it went up. And then, I closed my trades when the price came back to the middle. I didn’t win every single trade because the price wasn’t exactly flat, but it was stable enough that I turned $10 into $30 overnight. And then, obviously, I lost it all the next day.

Why did this happen? Why did I lose all my money so quickly? Well, because $1 was too big of a risk for a $10 account. In other words, my account size was too small. That’s 10% of my account on a single trade. That’s crazy! The point is, if you want to avoid blowing up your account, there is a minimum account size requirement, and you can’t ignore your risk % per trade. I know this sounds obvious, but it wasn’t for me when I was an absolute beginner, and it probably isn’t for most beginners out there.

So what’s the minimum account size you need to trade successfully? Well, for me, it was somewhere between $50 and $100. If you place a $1 trade with these account sizes, your risk percentage per trade will only be 1% to 2%. That’s much more reasonable than 10%, don’t you think? If you run a trade simulation in the probability section of the Trading Rush App, you will find that it can take up to 800 trades with a bad win rate strategy to blow up your account with this risk level. That’s a lot of trades. That’s reducing the probability of blowing up the account by a very big amount.

Remember when you trade on a practice account, you win a lot of trades, and your profit graph goes up?

You think you’ve cracked the code of trading success. But then you switch to a real account with your hard-earned money. And suddenly, everything changes. You start to lose money consistently, and your profit graph goes down and down. Some even complain that their broker can see their trades and is trading against them. No! That’s not how things work here! More than 50% of trading success is based on your Trading Psychology. If you are consistently winning in a practice account but losing in a real account, the problem is all in your head.

I know this from personal experience. When I was trading on small accounts in the beginning, I used to get confident after winning consistently for a while. I thought I knew everything there was to know about trading. So I decided to increase my account size by a large amount. But almost every time I did that as a beginner trader, something strange happened. The same confidence that made me win before suddenly disappeared. I became anxious whenever I placed a trade. I couldn’t stop checking the running trade every 5 minutes. You know that feeling when you place your first trade as a complete noob, and your heart beat starts racing? That emotional reaction is supposed to stop once you gain enough experience. But almost every time I increased my account size by a big number, I felt like I was trading for the first time.

Why did this happen? Because from a psychological perspective, I was not used to losing big amounts of hard-earned money in a matter of few minutes.

A while back, one of the Patreon Supporters also mentioned experiencing a similar thing. So I’m pretty sure most traders also feel the same way.

So how did I overcome this challenge? How did I stop letting my emotions get in the way?

Well, I came up with a very simple compounding rule and stuck with it for a very long time. Basically, every time I made a profit of around 30%, I would not only compound, which means also using the 30% profit to take the next trades, but I also increase the account size in a compounding style.

If the account size was $100, I would first make around 30% profit on that, which is $30. Then I would deposit another $200 into my account. Now my account size is $330. If I made a 30% profit on this new account size, which is $99, I would then add another $300 to my account. Now my account size is more than $700. And so on.

This way, I was gradually increasing my account size and getting used to trading with and emotionally handling losing bigger amounts of money.

My method of increasing capital can sound slow, but that’s really the big secret.

If you plot everything I said till now on a chart, it would look something like this. Well, may be a bit rough in reality, but you get the point.

Let’s say there were two people, Bill the first and Bill the second, respectively. Let’s say Bill the second started trading like how I did, which is with the minimum account size broker allowed. And the first Bill started with a $1000 account.

In the very first learning stage, where experience is zero and the probability of blowing up the account is high, Bill the first has an unnecessarily large account size. Whereas Bill the second’s account is small, just like his experience.

In the First month, they both blow the account. Bill the first is down $1000, and bill the second is down 10.

They learn something new and deposit more money into the account.

They both blow the account again because they know so little about trading.

Now Bill the first is down $2000 in total, and Bill the second is down 20 dollars.

If I asked you how many times a beginner trader blows up trading accounts, you would say more than 5, right? Let’s say 10 times before really getting into the top 10% of traders.

So if Bill the first blows up the account ten times before he finally gains enough experience to trade profitably, he will be down $10,000.

In other words, his cost of learning was 10,000. But things get even worse.

What if Bill the First doesn’t have $10,000 to start with next time? If he starts with $1000 again, he will have to make a 1000% profit just to recover his cost of learning. Let me repeat, that’s 1000%, not 100%.

That’s making 100% profit every year for 10 years without compounding. With compounding, it will be quicker, but then there can also be different market conditions where high returns simply won’t be possible.

Basically, unless he starts with a bigger account size, Bill the first is in a bad position.

But what about Bill the second?

Since he started with $10, after blowing up accounts 10 times, his learning cost will only be $100. That’s only 1% of what Bill the first paid for to learn the same thing.

If Bill the second starts with $1000, just like Bill the first, he can easily recover his cost of learning and move into the profit zone.

This is kind of like the Rabbit and the Turtle race story we heard as a kid. Even though Bill the second started small, he made profits faster than Bill the first, who started big.

That’s basically what I did.

See how I made 100% profit in a year, see what advanced strategies I used, see my running positions, and more by supporting Trading Rush on Patreon. I hope you learned something from my trading journey. That’s all!