Many novice friends, when they first start trading, are willing to participate in this market with a small amount of 100 dollars. At the beginning, they might choose to use 100 dollars, 200 dollars, or 500 dollars to participate. They even think about how to turn 100 dollars into 1000 dollars.
So is this kind of thinking feasible? Can you turn 100 dollars or a small account into a larger and stronger one? Let's take 100 dollars or 200 dollars as an example.
If your account funds are actually 200 dollars, and you set your single trade stop loss at 1% or 2%, with a 1% loss or 2% to determine your position, there are many commodities you cannot participate in. For example, take $BTC: if you set your stop loss at 1% or 2%, it is almost impossible. Looking at the current volatility of $BTC, 1% is 2 dollars; with a 200 dollar account, 1% is 2 dollars, and 2% is 4 dollars. Setting your position this way makes it very difficult to establish. Hence, you might not be able to trade $BTC at all. Therefore, many people trading with small accounts, especially those around one or two hundred dollars, do not fully comply with the requirements of capital management and risk control, often setting their stop loss at 10% or even 20% when participating in trades.
I believe many friends, especially those using small accounts in the trading process, manage their funds with a risk control method like this: a single stop loss of 100 dollars might be around 10 dollars or 20 dollars, right? I can say without hesitation that if you lose all your capital, it's just a matter of time. This is completely akin to a dull knife cutting meat.
Why do I say this? When you participate in the market with an account size of 100 dollars or 200-300 dollars, there are two possibilities. The first possibility is that you currently lack confidence in your trading. You may not be familiar enough with your trading system, or you might not even have a trading system, which is why you are willing to participate with a small amount of capital. You want to train, thinking that using a small amount of capital allows you to participate in the market, but actually, losing your capital is just a matter of time.
When you lose all your money, you deposit another one or two hundred dollars, only to continue losing in the market. After losing, you deposit another one or two hundred, right? Then you keep losing, resulting in a vicious cycle. In this market, you are in a state of losing money with a dull knife cutting meat. On the other hand, some friends might be quite confident in their trading systems and have a mature trading system, but currently lack capital, so they choose to participate in the market with a smaller account size. Is this feasible?
Let's do the math. For example, if you can maintain a win rate of around 60% while your profit-loss ratio reaches 1:1.5 or 1:2, in this market, if you strictly adhere to capital management and risk control requirements, you could participate in the market using 2% of your capital per trade. For a 200 dollar account, 2% is 4 dollars. Assuming there are 20 trading days in a month, if you make two trades a day with a profit-loss ratio of 1:2, you could earn 8 dollars. Therefore, for two trades, it's 16 dollars. If you multiply this by 20 trading days, you get 320 dollars. This is under the condition that you win every trade.
If your win rate is 60%, and you multiply it by 0.6, the profit number might not even cover your living expenses; it simply isn't enough. Therefore, if you have a one or two hundred dollar account and expect to grow it to 1000, or even 10,000 dollars, the difficulty is extremely high unless you are gambling. If you spot an opportunity, you might go all in, increasing your position on unrealized profits. This way, you might quickly grow your small account. However, if you do achieve turning 100 dollars or 200 dollars into 1000 dollars in one trade, it might not be a good thing for you; it could actually be bad.
Why do I say this? Because after having such an experience, you might repeat it one, two, or three times, and many subsequent trades may follow this pattern. Once you reach 1000, you might go all in again, aiming for 10,000. However, during this process, a single mistake could lead to a significant drawdown or even a total loss.
I believe many people encounter this problem when trading with small accounts. Some friends might argue that they can trade at a small scale, making 1-20 trades or even 30-40 trades a day. However, I must tell you that human energy is limited. Just sitting in front of a computer and trading incessantly does not guarantee profit. Each time you open or close a position consumes energy. Are there people who can open and close dozens of times in a day and still profit? Yes, there definitely are, but such people are not you.
You can look back at your own trading records. I believe there have been times in your trading history where you traded frequently, especially in short-term trading. You can see if this trading method has led you to profit or loss over time. After reviewing, I believe you already have the answer in your heart. Continuously engaging in high-frequency trading can easily lead you to become emotional. When your emotions triumph over your rationality, you may end up treating trading as a gambling form. You think you are scalping, but you actually end up gambling. I believe if your starting capital is only 100 dollars or a few hundred dollars, participating in the market is just a fantasy.
That is to say, I want to achieve 100, or 200, to reach 1000, 2000, 3000, or even 10,000, 20,000. I think you should not have such thoughts. Instead of continuously engaging in a vicious cycle like this, you might as well choose to trade with a demo account. When you can achieve stable profits on a demo account and develop your own trading system, and accumulate your own original capital, such as through scalping, it is much more practical than continuously cycling through this 100, 200, 300 dollars.
Using a few hundred dollars now to continuously bleed the market and send money is meaningless and valueless. A demo account can still help you train a trading system in this market. The money is trivial to you; if you fail, you can reset. If you can't achieve stable profits, then you should consider whether to give up trading.
Because your risk resistance with 100 dollars or 200 dollars is very low, compared to an account of 10,000 dollars, which has a much stronger risk resistance. Moreover, if you can strictly adhere to the rules of your trading system and trade according to risk control standards, you could continuously compound your account and achieve significant returns. Thus, if you are still using 100 dollars or 200 dollars and continuously engaging in a vicious cycle in the market, it would be better to consider trading with a demo account to eventually develop your own trading system and achieve stable profits.
What Xiaozhi wants to say in the end is that a successful trader never achieves tenfold or hundredfold returns in a day or even a month. Only by continuously compounding can you achieve a leap from small funds to large funds.