Do you want to take your trading to the next level? Simple: Trade Shorter, gamble less, cut losses faster, but still let winners run away with the prize money. If you follow this rule, you’ll be able to limit your losses while still having the chance to make big money on your trades.
Reasons Why Trading Smaller Is Better
- When you risk less of your money on each trade, you don’t have to deal with as much stress. Making a single trade risk 1% of your capital makes each of the next 100 trades equal. It makes every trade just one of the next 50. Each trade risks 2% of the capital. You’ll have a better chance of succeeding if you cut your stress in half or even 100.
- When you take small risks with your trading, you don’t have to worry about whether you will hit a home run or not. You just have to keep getting on base.
- Proper risk management reduces the amount of money you lose when you trade, which makes it a lot easier. There is a lot less stress when you aren’t trying to come back from 25%-50% drawdowns. I’ve been there and done that myself!
- A trader who trades small has a much better chance of not letting their emotions get the better of them when it comes to making the right decisions. The larger the trade, the noisier the emotions will be.
- Having a trading plan makes it easier to stick to it when each trade isn’t going to make or break your business. It’s just one job that they do.
- Taking a stop loss can be easier if the losses aren’t so bad for your money. When you lose 1% or 2% of your trading capital, it’s not as hard to deal with as when you lose a lot. People are more likely to keep their money and hope it comes back.
- As a swing trader, you don’t need to keep an eye on every tick. If you want to be a long-term trend or swing trader, you can just trade the starting hour or end-of-the-day prices instead. There is more attention and time given to the market when the trade is bigger. This usually doesn’t make more money or improve your chances of winning, but it can be stressful and take up a lot of time.
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