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Turning A Small Account Into A
Big One Part 2
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The second article in this series

1
(https://www.forexmentoronline.com/turning-a-small-account-into-a-big-
one-part-1/) is going to focus on a rather unconventional account building
method I began using way back in the early days of my trading career.

The method I’m going to show you today may raise a few eyebrows from established
traders who always propose that you should trade with a consistent risk size, but in
my experience I know the only way to turn small trading accounts into big ones in a
short space of time is by using unconventional methods and tactics not usually talked
about in normal trading literature.

Probability
 

To understand how this method works I must rst talk about probability.

If we were to have a trading strategy which gave us a 50-50 chance of making money
on each trade would you know what sequence of wins and losses you would have ?

No, there’s absolutely no way to know.

But what we do know is at some point there are going to be times when we win
multiple trades in a row and lose multiple trades in a row. We could have winning
streaks where we make money on 7 consecutive trades and we could potentially
encounter times when we lose money 3 or 4 trades in a row.

Even though its impossible for use to work out when these winning and losing
streaks are going to happen if we know at some point they are guaranteed to happen

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it means we can use them to make a lot of money

This is the general idea the pro t building strategy is based on.

For the method to work correctly we don’t need to go on massive winning streaks
where we make pro ts on 10 trades in a row, in fact we only need to win on two
consecutive trades in order to make good money.

Stake=1  means 100 pip movement makes you £100

Stake=2 means 100 pip movement makes you £200

The higher the leverage you use the smaller the distance the market has to move in
order for you to make a lot of money.

To make £1000 trading at the lowest leverage available means you will have to win
ten trades in a row without losing, whilst making £100 on each trade in the process.

This is equivalent to the market moving 100 pips ten times with you getting the
direction right every single time.

It would be almost impossible for a new trader or even experienced trader to achieve
this.

But I wonder how long it would take to make £1000 if you were placing trades at a
leverage ten times bigger than the lowest leverage available ?

In other words, stake=10 for people using a spread betting broker.

This would mean the risk on each trade (assuming the distance of your stop from
entry is 10 pips) would be £100.
The market would still have to move 100 pips but we would only need win on one
trade to accomplish this compared with ten if we were trading at the lowest leverage
available.

The main problem for most traders is they don’t have enough money in their
account to consistently trade at this size, typically, I believe the average forex trader
is trading forex with an account under £1000, now assuming their risking 1% of the

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account on each trade that means the maximum they should be losing is £10.

The method I’m going to share with you now does not require you to have thousands
of pounds available in your trading account.

Even if you have as little as £200 in your trading account you will still be able to
implement this account building strategy successfully.

The Method
 

The basic idea behind this strategy is when you make money on a trade you should
increase the size of the next trade you plan to place.

Most traders do not do this, they always trade with the same leverage on every trade
until they reach some sort of goal they’ve set themselves.

For example you may have £1200 in your trading account and you currently trade 1
micro lot on each trade, your target might be to reach £2000 before beginning to
trade 2 micro lots, this is probably going to take a long time so to speed things up a
bit you can try implementing my pro t building method.

Skip the video below to the 34:38 mark and listen to what the former pit trader
(basically day trader ) says about trading. BTW the video’s quite funny, the dudes a
bit smashed.
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Profit Building Example
Lets say you’ve been trading with 1 micro lot on each trade you place (if you’re using
a spread betting broker like me this will be represented as stake =1 ) and you have just
made £50 on your latest trade.

On the next trade instead of placing the trade at 1 micro lot you instead increase to 2
micro lots.

So now to make £50 on this new trade the market only has to move half the distance
it did on your rst trade.

First trade at 1 micro lot, market needed to move 50 pips to make £50

Second trade at 2 micro lots the market only needs to move 25 pips to make £50

Simple enough right ?

Important Guideline’s
 

Whoa now hold on a minute! there’s a few really important rules you need to know
before you start using this method in your trading.
The rst, and probably most important rule, is to always account for losses before
increasing the size of your next trade.

This is best explained with another example.

Imagine you have lost your previous 3 trades and collectively the losses you’ve made
total £30.

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You place another trade, the market moves in your favor and you end up making
£100, now you want to implement the method I’ve outlined to you and increase the
size of the next trade you plan on placing.

However, before you work out how much to increase it by you must rst take away
your previous losses from your recent gains.

£100 – £30 = £70

£70 is the total amount you have to determine how much you risk on the next trade.

Important Note:

Make sure you always work this out before increasing size. By always accounting for losses
beforehand your deliberately making sure not to trade in a reckless way which could harm your
trading account, if you fail to account for your previous losses and end up losing on the trade
which you increased the size of, you will not only need to make back the loss on that trade but
also, the three other losses beforehand.

What I tend to do is take half of what I’ve made then place the next trade at that size.

In the example above the total a er accounting for losses was £70, so the maximum
amount you want to risk on your next trade is £35.

With £35 being the total we are willing to risk on our trade, the other £35 which we
have le over we can keep as pro t.

Stop Distance
 

Another thing that determines how much you can increase the trade by is the
distance of the stop-loss from the entry.

If the distance of the stop is 10 pips that means, using the example above,  the total
amount you can risk is 3 mini lots.

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In a scenario where the stop-loss was 15 pips away from entry like in the image
below, it would mean you should only place a trade at 2 mini lots which works out at
£30 total risk, and you keep the remaining £40 as pro t.
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(https://dlb6879620p6s.cloudfront.net/wp-content/uploads/2015/11/Aviary-
Photo_130943323056348331.png)

Watch Out For News!

 

The nal thing you must pay attention to when placing trades at an increased size is
news events.
Big high impact news events can have the ability to cause slippage on your stop
losses, meaning you could potentially lose more than what you originally
anticipated.

Although this is quite rare (its only happened to me twice in many years of trading) it
still has the potential to happen, so be sure to not place trades with increased size
when any of the following news events get released.

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Non Farm Payrolls/NFP – Usually have a major impact on the markets when
released

FOMC Statement – Refrain from placing any trades at all during this one as things
can get really messy in the markets.

Interest Rate Announcements – Just stay out the market completely with these.

The other news events should all be okay in terms of their impact on the market and
any trades you may have placed, although some will have a red icon meaning their
high impact, the e ect they have on the market will not be enough to cause you
slippage on your trades.

Summary
 

My goal with this two-part series was to give people real and genuine methods for
building small accounts into big ones, although I think many people will nd the
method I’ve presented above controversial as it contradicts a lot of what traders have
been told during their learning process, I feel as though if you follow the typical
trading advice you will not really make any progress or advancement in your trading
career.

One of the o en repeated facts of trading is 95% of traders lose money consistently,
while this gure many not be entirely correct (Oanda reported around 60% of their
clients lose money) it still shows us the normal trading advice isn’t getting people the
results they expect, if it was, a lot more people would be making money.
 Thanks for reading, please leave any questions in the comment section below.

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