Learn why trading Micro Accounts is so powerful and how it can save you thousands of dollars in your trading education.
Most new Forex Traders get into to make money, a lot of money.
They then practice on very large demo accounts in the tens of thousands of dollars, and get somewhat good before trying their luck on a live account only to blow their equity time and time again.
These traders are looking for big wins so they put in large amounts of money into their account going for big home runs, and sometimes they score big time only to give all their profits back to the market. They overpay for their trading education.
The more conservative newbie is risk-averse and only trades a demo account before putting a small sum of money into their account to trade. The only problem is small accounts return small profits so what's the point?
2. Setting Realistic Profit Expectations Trading Forex
When I first got into forex trading many of the coaching influencers of the time often stated that a 20% annual year return was the profit range for the PRO Traders and that a return of 2-5% is what all traders should aim for each month. This confused me, how was I ever going to make money doing this, I didn't have 10K or 100K to trade. I could literally make 2% on one trade on a $100 Account but I was supposed to target about 20% for the year?
This gave me a skewed view of profit expectations trading Forex which almost caused me to quit, the only reason I continued is I loved trading, it eventually got to a point where the money didn't matter, being consistently profitable was the true prize.
I've come to realize the YouTube Forex Trading Influencers I followed back in the day were probably managing very large accounts where 20% on a $1 million would be a very good return indeed. Most retail traders generally have micro accounts and so the reality is the profit target should be based on the size of your account.
For example, the below is a rough guide as to what profits I would aim for trading small accounts using Micro lots (0.01):
$100 Equity - 100% Return in 3-6 Months
$500 Equity - 50% Return in 3-6 Months
$1000 Equity - 50% Return in 6-12 Months
These are conservative/ minimum estimates based on what I believe I could achieve in any market condition over that period of time, being selective as to what opportunities I go for. These estimates are of course based on using the Thumb Money technique, I can't speak for other trading strategies.
3. Micro Accounts Save You Money
The hard reality is Forex Trading is hard, it can take months or years to become consistently profitable. It took me 2 years of hard work.
The question is how much do you want to pay for your education, and I'm not talking about signing up for an overpriced course or even my free course.
What I'm trying to communicate is, the best way to learn is to trade live accounts in real market conditions. I'm not a fan of Demo accounts and believe the less time you spend on a Demo the better. You will gain more from spending your time on a trading simulator which is a topic for another post. Demo accounts are great for getting to know the mechanics on how to use trading tools and platforms, but terrible for practicing day trading or swing trading over the long term.
The psychology behind trading a Demo account and a Live account is very different. When your Demo account is deep in the red, you feel disappointed but the emotions don't run deeper than that because you can reset your 50k account. When you're deep in the red on a live account it can feel like the world is literally ending especially if you trading a somewhat large account that you didn't tell your wife about.
Your $2k live account then implodes, you immediately think of 10 things you did wrong and you knew better, next time you won't make the same mistake. The only problem is you're now $2k out of pocket there is no way your wife will sign off on you having another run at it. This is a prime example of trader overpaying for his education.
This trader could have executed the same strategy on $100 or even $200 account which would later implode, and learned the exact same lessons for a fraction of the price. All new traders will at some point blow a live account. It's part of the learning process.
Trading small accounts is not very glamorous but they are a means to paying a small amount for your trading education in live market conditions.
Once you master the small account you then have the right to increase the equity in your account. If you can successfully trade a small account then chances are you can successfully trade a larger account. If your not constantly profitable on a small live account under no circumstances should you ever trade a large live account.
There is more to trading than just making money.
Trading is a discipline like any martial arts such as Taekwondo, Jiu-Jitsu or Karate. It takes a lot of practice, time, dedication, and mentoring to become a brown or black belt ie consistently profitable. Trading is not about making as much money as possible, it's about consistently profiting from the market over long periods of time. Trading Micro Accounts is basically is when a traders earns his white belt and embarks on the awesome and sometimes brutal art of trading.
The best next step to find consistent profits is to find the right instructor.
No one ever became a Taekwondo black belt by watching YouTube videos or taking a free online course, and you won't become a profitable trader if you follow that same pattern.
Becoming consistently profitable is as rewarding as graduating from university or becoming a parent, it's worth your while to find a coach or instructor to help you achieve that goal. I'd personally be more than happy to help.
Author: Ryan Norris Creator of the Thumb Money Method