$10 Challenge- Lessons Learnt
During the 3rd and 4th weeks, I learnt that your account balance dictates your trading style. A scalper can trade an account on a small time frame with more success than on the larger time frames. A tight stop loss and the available margin allocated to your account balance sets the parameters for trades. An example of this is a 40 pip stop loss is equal to 40% of your account should the trade go against you. Whereas when you are scalping on the smaller time frame you can use a smaller stop loss which means that you have a smaller percentage risk per trade.
In several instances, I had to cut losses at 10 or 20 pips to avoid significant loss. Overall you need to give your trade room to breathe, which means that you cannot have an SL that is too tight.
You cannot swing trade with a smaller account because of the manner that the market moves. Scalping, on the other hand, does not depend on your account size.
Lessons learnt during week 3-4:
1. Capital is key
This challenge has proven that the bigger the account, the friendlier the market. It’s important to note that it’s not impossible to grow a smaller account it just requires more work.
2. Scalping is king
Before you start trading the live market; keep in mind that a scalping strategy is best for an account of this size. Once you have more money to trade you can enter larger time frames and swing trades. For the sole purpose of growing your account, we highly recommend that you piece together a scalping strategy BEFORE you start trading live.
3. Risk Management
Now that we have highlighted that scalping is the best approach for growing a small account; we need to hammer on the concept of risk management. With scalping, you can make money very quickly, but just as fast blow your balance. Please be mindful of the fact that trading is a long term investment and not a means for a quick buck – trade responsibly.
I learnt these lessons the hard way when I nearly blew my account as I was overconfident in my strategy and did not apply my own rules.
Overall I ended the challenge in a loss; to the point where I was unable to place any further trades since there was not enough of a margin available. Please remember that a small account requires constant tending to ensure that you keep a healthy account balance.