You've heard the saying "biting off more than you can chew" right?
The truth is that most investors and traders are puppies when it comes to their account size.
Every little puppy wants the biggest bone he/she can find. In this analogy, the bone is your account in case you are already not following alone.
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The bigger your account size and the more money you have, the greater "bone" you have to chew.
Unfortunately, the hard truth is that having a bigger account has no correlation to your success. Here's why. . .
More Money Might Make You Trade Worse!
I've coached over 200 individual traders in the last seven years one on one. Some starting with large accounts and some starting with small accounts.
What I've found is that having more money to start in your account makes you ignorant of the risks of options trading.
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You see when someone has a lot of money to trade with they scale up position size too high, take horrible risk/reward pricing and enter too many bad positions just for the sake of using all their money up.
Now it's not to say that having more funds hurts (it can help in many other ways). What I'm saying is that money is NOT an equalizer for successful trading strategies.
"If I Only Had More Money. . .Then"
Enter the large mass crowd of retail investors.
On the flip side of the argument above you'd think that traders with smaller accounts are more diligent with where they invest and watch their money more closely.
WRONG! They do the exact opposite. Blindly invest and trade because " it's only a small account " and " I can afford to lose some money. "
Not sure where some of you grew up but in my household we'll never reach a point where we can afford to lose money.
So the answer for these people = more money. If they only had more money. . .
THEN they would start to pay more attention to their positions.
THEN they would learn how to manage risk.
THEN they would trade the right strategies.
Look we all had these thoughts before (myself included) but it doesn't change the underlying reality about our account size.
Which is that account size means jack-squat.
The $5,000 vs. $500,000 Lie You Told Yourself
In all coaching, research and market experience I've had I firmly believe that if you show me someone who can consistently generate income with $5,000 then I'll show you someone who has the ability to do it with $500k.
This does not work in the opposite direction.
If you cannot make money now then why on earth do you think you'll magically be more successful with more money? You won't and you know it.
But you're afraid to tell yourself this truth - because it's easier to lie to yourself and blame it on a money.
Start Small, Work You're Way Up
I'd love to get your thoughts and opinions on this via the comment section below? Do you think larger accounts make better traders?
Even if you have a lot of money to start with (and most people don't) I suggest you only start with around $5-10k or less if you have to when trading options.
Do this for six months and see where you end up before you commit larger funds.
Take small bits and see if you can manage those before you go to the big old bone!
Wednesday, 2 January 2019