Optimization For Small Accounts

by | Oct 15, 2019 | blog, Editorial | 0 comments

There once was a time when having a small trading account was a disadvantage. The fees and commissions associated with trading were enough to eat away at any small account.

But that was then… and we are now entering the world of commission free stock trading… are options next?


Commissions in options are low enough that they should be too much of a cost to your trading.

In fact, several of my clients with small accounts are thriving, including John, who was able to return a whopping 70% following my alerts in just two weeks:



While I can’t promise you’ll get the same results as John, I can share with you some tips that I believe can help you grow a small account fast.

You’ll be amazed at how much progress you can make by cutting down the number of trades you take and limiting them to just your best setups. But finding the trade is just part of the process… I’ll teach you how to set up favorable risk-to-reward trades to get the most out of a small account.


Pick premium setups

Not every trade is created equal. Some setups do work out more than others. But what makes them special?

I call it ‘The Great Convergence.’

Think about how many different ways you’ve heard about trading over the years; trend following, moving averages, Bollinger Bands, cross-market relationships… the list goes on and on.

Any trading system can work under the right circumstances. When multiple factors converge… that’s what makes a great setup.

My favorite trade happens to be the Head & Shoulders setup. This reversal pattern works well by itself.

Now, layer on a support and resistance level to this pattern. That’ll give it an extra kick in the right direction.

One of the key elements in my trading strategy requires support or resistance levels. Without those I’ve found that setup patterns tend to fail.

Let’s add in a little more sauce to the pot. What if the market’s trend flowed with our trade? Now we’ve got three things working for us.

Individually these pieces may only work 52%-55% of the time. Add them together, and your trade now has a 70%+ chance of success!

Fun fact: Weather forecasters use a similar process. It’s known as ensemble forecasting. The theory is the average of different forecasting models is better than any individual one. With multiple setups aligning, you have the Great Convergence.



Use proper risk management


I teach people how to manage their risk using a percentage of their total account. Many people use the 5% rule.


Risk 5% of $1,000. A $50 trade works just as well as a $500 trade. You can adjust the option contracts you trade to meet your needs.

Don’t think about trading in terms of trying to get a daily profit goal. Try to make the right decisions.

You can start out with a simulated account to practice. Learn the ropes of how to execute trades. Move to trade real money when you’re comfortable.

Here’s an example from the other day. I sent the following out to members for the trade of the day.



Let’s say you didn’t want to risk $217. The $290 puts traded at $1.26. You could still have gotten the same +10% or more within minutes.


SPY Oct. 11th $290 puts intraday chart



Watch for pattern day trading


Traders in the U.S. with less than $25,000 in their accounts are subject to pattern day trading rules. This limits you to three opening transactions per five days. This applies to both stock and option accounts.

This isn’t a limiting factor. You can still trade the market and make serious money.

However, not all brokers will stop you from placing trades violating the law. The first time you screw up they give you a warning. Do it again, and your account will be frozen for 90 days.

Use an excel program, sheet of paper, or whatever works best to keep track of your trades. Even if you have a trading journal you should manage this part separately. A small amount of extra effort to double-check can save you a world of problems in the future.

Traders outside the U.S. may not be restricted by the same laws. There are also some brokers based outside the U.S. that work with U.S. clients that may not be subject to the pattern day trading rules.

You should check with each broker and conduct your individual research to determine which rules apply to your situation.



Know your plan


Preparation will help you more than anything else in trading. You should be intimately familiar with your strategy, including stops, targets, entries, as well as the amount you want to trade.

Small accounts need tighter controls to maximize performance. This may require active management in some cases.

Trades that have tight stops and targets can move fast. You want to be in a position to act quickly to achieve the best results.

Spend time in a simulator before you trade for the first time. Practice makes perfect. The last thing you want to do is learn by blowing up your account.



Don’t start from scratch


Traders flail around for years trying to refine their strategies. Even our CEO Jeff Bishop blew up multiple accounts before he became successful.

Any good strategy, including my own, should come with a solid track record and educational support. There’s no reason to have to figure out how to trade the markets on your own.

My Daily Deposits is specifically designed to work with accounts of all sizes. The strategies in my service take advantage of both bear and bull markets… volatile and dull markets.

And if you’re not a member, but would like to join, then make sure to do it before tonight to take advantage of my special offer.


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