Does Size Matter?
Download: Does Size Matter? (pdf)
Don Dawson discusses the traps of trading a small account and how to successfully trade a small account.
Futures trading attracts people thinking it will be easy to turn a small account into a large account. Reality is quite different – this is very difficult.
Trading a small account requires extreme discipline and risk management to guard against unexpected and large losses. Simply put, there is no cushion for big mistakes at this level.
Another drawback to a small account is that you are limited to the type of trading strategy you can use and the number of contracts you can trade, unlike a larger account without these restrictions. For example, if you wanted to buy three contracts and scale out of them, and take profits at different levels as the price moved your way, you would be restricted in doing this with a small account.
Money management with any account size cannot be emphasized enough, much less a small account. Here are a couple of ideas to help you with this area of trading:
• Maximum dollar loss for the day
• No more than 1-2% of account size should be risked on any one trade