Small Accounts are Out; Prop Firms are In.
Profound statement, but it's true, my friends.
Small accounts can lead to small insufficient earnings when trading forex.
While you want to make $100 a trade, you may only make $10 because that's all your small account and leverage may afford you for the time being.
Solution: If you aspire to make four figures, it is essential to trade with five figures. Turning $100 into $10,000 or $500 into $100,000 is much quicker and more feasible when you have a larger capital base. With a prop firm, you can afford to trade less frequently and prioritize quality over quantity, eliminating the struggle often associated with small account trading.
Implement a Proper Risk Management Strategy
Trade with skill, not luck
Limiting your risk on each trade to no more than 1% is crucial to safeguard your capital and increase profitability. This approach allows you to rely on your trading skills rather than luck. Remember, success in trading is a result of consistent and disciplined decision-making.
Consistency in Risk Allocation
Maintain a consistent 1% risk level as your account grows. As your balance increases, the amount of money you risk will grow proportionally. For example, starting with a $100,000 account would risk $1,000 (1% of $100,000). As your account balance reaches $101,000, your risk would be $1,010 (1% of $101,000), and so on. Consistency in risk allocation ensures that your percentage risk remains unchanged while adapting to account for growth and drawdown phases.
Leveraging Position Sizing Based on Account Size
Your position or lot size is critical in determining how much you value each pip movement. Finding the right position size is essential to prevent excessive drawdowns or losses from jeopardizing your trading account. Position sizing calculations consider your account balance, percentage risk, and stop-loss levels.
For instance, if your stop loss is [b]30 pips[/b] and you have a [b]$10,000[/b] account, your position size would be $100 (1% risk) divided by 30 pips, resulting in [b]$3.33[/b] per pip. Your [b]lot size will be 0.33 per pip[/b]. Maintaining consistent risk management practices allows you to aim for profitable trades while preserving capital.
Focus on Higher Reward-to-Risk Opportunities
Losing trades deplete your capital, so you want to win higher than your losing trade amounts.
To sustain long-term profitability, it is essential to prioritize trades with a higher reward-to-risk (RR) ratio. Winning trades compensate for losing trades and help you overcome drawdown phases. Avoid subpar trades that you force or that fall below your minimum RR requirements.
Strategies to Achieve Higher RR
Multiple Timeframe Analysis: Shorten Stop Loss
Analyze multiple timeframes to identify strong trade ideas. Once you've determined a suitable trade on a higher timeframe, drop down to lower timeframes to tighten your stop loss. This approach allows you to manage risk effectively and maximize your RR ratio.
Utilize Higher Timeframes or Tools: Extend Take Profit
When dropping down to lower timeframes, refrain from shrinking your take-profit target. Instead, utilize higher timeframes or tools like Fibonacci to extend your take profit level. Setting reasonable profit targets increases the potential for achieving higher RR trades.
Quality Trades and 4-Figure Trade Planning
If you don't plan, you'll only notice the inconsistent results.
Trading with a focus on quality trades offers numerous benefits. By targeting high-quality opportunities and planning trades effectively, you can profit during trending markets, reduce mistakes, and avoid the need to chase after four-figure profits.
Commitment to Make 4 Figures & Stay Under Drawdown Limits
Plan Weekly and Allocate Resources
Plan your trades every Sunday to determine each trade's potential profit or loss. Identify high-quality opportunities and allocate 1% of your capital to each trade. Assess if each opportunity meets your minimum RR requirements and if it brings you closer to achieving four-figure profits.
Example: $10,000 Account
Suppose you risk $100 on Trade 1 and make $333 (3.33% return), then risk $103.33 on Trade 2 to make $516.65 (5.16% return). After two trades, you have earned $849.65, representing an 8.49% increase in your account balance. Continuously monitor and adjust your trades to maintain profitability.
Is this possible? Yes!
Is this easy? No!
Why? Because you'll have to get out of your way and head to make this possible.
While achieving consistent four-figure profits through trading requires dedication and skill, implementing the strategies discussed in this post can significantly enhance your chances of success. By trading with a prop firm, implementing proper risk management strategies, focusing on higher RR opportunities, and prioritizing quality trades, you can confidently navigate the dynamic world of trading and boost your financial growth. Trading success comes from discipline, continuous learning, and a well-defined trading plan.
Best of luck on your journey to four-figure profits!
P.S. Trade on Purpose community is back open and ready for your presence.
Our first Masterclass, "How To Identify Trade Ideas On Multiple Timeframes," will be held June 11, 2023, at 5:30 pm EST. Don't struggle with MTF again after this class. Join Trade on Purpose and step ahead with the TMP strategy before the Masterclass.