Introduction
Hello, friends. I'm Lao Mao. Today, I want to talk about a very common issue: how small funds can grow step by step. This content is not a get-rich-quick secret. It's the honest truth I've learned through years of experience in the market. I hope it can help you avoid detours and steadily turn a small sapling into a towering tree.
Key Principles for Small Fund Growth
In my opinion, the growth of small funds depends on avoiding common pitfalls and adhering to some simple but crucial principles. It's like building a house. If the foundation is not solid, the tallest building will easily collapse.
1. Stick to High-Probability Trading Opportunities,宁缺毋滥
Many new traders have a misunderstanding when they first enter the market. They think that the more trades they make, the more money they will earn. I was the same way when I first started. I couldn't wait to stay in front of the computer all day, trying to catch every price movement. But in the end, I made dozens of trades a day, not only exhausting myself but also often losing money in my trading account.
Why is this? Think about it. How many high-quality trading opportunities are there in the market every day that are really worth taking? When you try to catch all the fluctuations, you will inevitably lower your standards, and even start to fantasize about the market, forcing yourself to find reasons for trading. The quality of such trades is definitely not high. Moreover, every trade has costs, such as spreads and commissions, which will gradually erode your precious principal.
So, based on my 18 years of experience, I tell you that if you want small funds to grow, you must first learn to be picky. Focus on trading opportunities that meet your trading system and have a high probability of success. Be patient and wait, just like a seasoned hunter waiting for the prey to enter the best shooting range. Before each opening, ask yourself a question: What is the reason for me not to do this trade? If you can find sufficient reasons not to do it, then give up decisively. This can help you filter out many low-quality trades and improve the overall win rate and efficiency. Remember, there are always opportunities in the market, but your principal is limited. Don't waste it on those unworthy impulses.
2. In the Early Stage, Focus on Risk-Reward and the Trading Process, Not on Money
This may sound counterintuitive. We come to the trading market to make money. How can we not look at money? But I tell you, especially in the early stage of small funds, if you pay too much attention to the change in the account amount, your mentality will easily be affected.
For example, if you just made a single profit, you may start to worry, for fear that the profit will be lost and you want to take the profit. As a result, you miss the bigger increase later. On the contrary, if you lose money, you may be eager to get it back, and the more you do, the more mistakes you make, and the loss will further expand. These are all because you care too much about the result of money.
Professional traders pay more attention to the risk-reward ratio and the trading process. You can regard the potential loss of each trade as a risk unit, which we can simply call 1R. Your target profit should be 1.5R, 2R, 3R, 5R, or even 10R. In this way, even if your win rate is not particularly high, such as only 50% or even lower than 50%, as long as your average profit is greater than the average loss, your account will still grow in the long run.
So, I suggest that in the small fund stage, you might as well regard trading as a practice, focus on polishing your trading system, strictly implement your trading plan, and control the risk of each trade. Don't be too happy or sad because of one or two days of profit or loss. When you do the process right, profit is just a natural result. I never show off how much money I made one day because I know that sustainable and stable profitability is far more important than one or two windfalls.
3. Overcome the Demons in Your Heart and Learn to Let Profits Run
This is the most difficult part of trading and a great test of human nature. Many traders, including me when I was young, have made such mistakes: holding on to losing orders and not being able to hold on to winning orders. As soon as you see a little floating profit in your account, you can't wait to close the position, for fear that the duck in your mouth will fly away. As a result, you often pick up sesame seeds and lose watermelons.
Why is this? Because human nature is inherently averse to uncertainty and likes to take profits. But the trading market is often anti-human. What really allows your account to achieve leapfrog growth is often those big trend markets that you have caught and persisted in holding. If you always run away after making a little money, then you need a very high win rate to cover those inevitable losses, which is too difficult for most traders.
So, I often say to cut off losses and let profits run. How to do it? First of all, set a stop-loss before entering the market. This is an iron law to prevent small losses from turning into big losses. Secondly, when the trading direction is correct and the market develops as expected, learn to overcome the fear and uncertainty in your heart and give sufficient growth space to profits. You can use the mobile stop-loss method to try to capture the extension of the trend while protecting the existing profits. This process will be very difficult because the market will not be smooth sailing. There will definitely be corrections in the middle, which will test your confidence in holding positions. But only by overcoming this demon in your heart can you seize big opportunities.
4. The Great Way is Simple: Focus on One Trading Strategy in the Early Stage
There are a wide variety of trading strategies in the market today, and various indicator theories are emerging one after another. Many newbies are easily caught in a strange circle of constantly learning new strategies, each of which is just scratched on the surface. Today, I heard that Strategy A is good. After using it for a few days and losing money, I quickly switched to Strategy B. As a result, Strategy B didn't work either, so I went to learn Strategy C. In the end, I didn't learn any strategy well, and my account was always in a loss state.
I have also studied many trading methods in these 18 years. My experience is that there is no absolute good or bad trading strategy. The key is whether you can understand it deeply and whether this strategy matches your personality and your time arrangement. More importantly, any strategy needs to be verified and optimized for a sufficient time before it can be used by you.
For small fund traders, I strongly recommend that you must focus in the early stage. Choose a trading strategy that you can relatively easily understand and has a clear logic, and then spend enough time learning, backtesting, and real trading. In this process, you will encounter various problems and have a deeper understanding of this strategy. Only when you really understand a strategy and form muscle memory can you use it flexibly in actual combat. When you have refined a strategy and your account will also grow steadily, then consider learning and expanding other strategies. At that time, profit will come naturally. In the early stage of trading, it is especially true that all kinds of martial arts are not as good as one skill.
5. Capital Safety is the Lifeline: Protect Your Principal at All Times
For small fund accounts, the safety of the principal is paramount. Because the principal is small, the risk resistance is weak. A big loss can make you seriously injured or even lose the confidence and capital to continue trading. I have seen too many talented traders who made a lot of money at the beginning but finally left the market in a gloomy way, not because their analysis ability was not good, but because they did not do a good job of fund management and fell into a fatal trap in one or several transactions.
So, how should we protect our funds? First of all, it is the strict implementation of stop-loss that I have repeatedly emphasized. This is the first line of defense to prevent small wounds from becoming fatal injuries. Secondly, control your position. Don't place a heavy bet or even a full position just because you are particularly confident in a certain trade. Remember, the only certainty in the market is uncertainty. Any trade has risks. Only reasonable position management can make your losses within a tolerable range even if you make a wrong judgment.
Another thing that many newbies easily ignore is how to deal with continuous losses. Sometimes it's not that your strategy is wrong or that you did something wrong. It may just be that the market environment is not suitable for your trading method for the time being. At this time, if you don't stop in time to reflect but continue to trade stubbornly, it is easy to fall into a vicious cycle of losses. So, I set a rule for myself. When the continuous loss reaches a certain number of times or amount, I will force myself to stop trading for a period of time, calm down, analyze the reasons, and adjust my state. Just like when we drive, if we feel something is wrong, we have to pull over and check, instead of continuing to drive blindly. Protect your principal, and you will have the opportunity to fight a long-term battle in the market.
6. Give Up Chasing Daily Profit Targets and Let the Process Determine the Result
Many new friends like to set daily profit targets for themselves. This seems very inspiring, but in actual operation, it often has the opposite effect. Why? Because the market is not an ATM. It has its own rhythm and will not give you money every day. If you set a daily profit target and fail to achieve it or even lose money one day, your mentality will easily be out of balance, and you may make some unplanned and riskier trades in order to catch up with the target, resulting in more losses. This is like losing weight. If you can't help eating a little more today, you may think that it's better to break the jar and start again tomorrow.
My approach is not to deliberately pursue how much money I must earn every day. My focus is on the positive expectation that the trading system can bring on average. I will estimate how much R profit my system can generate in a period of time through a large number of backtesting and real trading data according to my trading strategy, and then set a relatively long-term target according to my expectation, and then deduce how much risk each trade should bear.
For example, if your system can make a net profit of 10R on average in a month and your monthly target account is to increase by 10%, then you only need to ensure that your trading process is strictly implemented according to the system and the risk is controlled within the preset range. Then this monthly target is very likely to be achieved. As for whether it is a profit or a loss today and how much profit or loss it is, it is just a normal fluctuation in the process.
The advantage of this approach is that you shift your attention from the uncontrollable daily results to the controllable trading process. You only need to focus on implementing your strategy well, and the rest is left to probability and time. This will make your trading more calm and your mentality more peaceful. Over the years, I have seen too many traders who have lost their direction because of chasing short-term goals. Remember, stable growth comes from the persistence of the correct process.
Conclusion
The growth of small funds is destined to be a bumpy road. It requires patience, discipline, and continuous learning and reflection. Trading is a marathon, not a 100-meter sprint. Those who laugh last are often not the fastest but the most stable. I hope today's sharing can bring some inspiration and help to you who are struggling on the road of small funds. Thank you for watching. I wish you all smooth trading and a prosperous account.
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