Listen, traders …
I get it.
The beginning of your trading journey can seem overwhelming. Maybe even scary.
A lot of newbies dream of hitting it big right from the start, managing massive accounts and bagging some serious cash.
But here’s the thing …
Diving in too fast can blow up your account before you know it.
Today, I’m here to share a little secret with you — starting with a small account can actually be your golden ticket to long-term trading success.
I’m going to show you why beginning with a small account isn’t holding you back but setting you up for some serious wins down the line.
Drawing from years of experience in the hard-and-fast world of Wall Street floor trading, I’ve got the lowdown on how to grow your account without risking it all.
Here’s how to make big moves with a small account.
Start Small, Dream BIG
I’ve met tons of new traders who can’t wait to go all in.
And to that, I always say, “Start small, but dream BIG!”
I get it. It’s exciting to imagine having a seven-figure account when you’re just starting out.
And with some grit and a solid game plan, you might just find yourself handling large trades and scoring those wins one day.
But don’t rush into things, especially when your account is still small.
Here’s the thing, a big account isn’t just a ticket to bigger wins … it also opens you up to the possibility of bigger losses.
The more you put on the line, the more you stand to lose. It’s that simple.
So, here’s how I look at it: Starting with a small account is actually a good thing. It prevents you from making account-ruining mistakes while you’re still learning.
And if you’re trying to grow a small account quickly — don’t sleep on options trading.
5 Ways Options Can Help Small-Account Traders
Why should traders with small accounts consider trading options?
- Lower Cost to Trade
When you buy a stock option, it often costs less upfront than buying the stock outright. You’re not risking as much. This is a bit like putting a small deposit down to hold your place in line for something you might decide to buy later.
- Leverage
Each options contract represents 100 shares of the underlying stock, causing the % moves to be amplified compared to the moves in common shares. This is the reason one big options trade could exponentially increase your account value.
- Variety of Strategies
Strategically, trading common shares gives you only two choices: buy or sell (long or short). Conversely, the options market is like an all-you-can-eat buffet of potential trading strategies.
- Protection and Hedging
Sometimes, stock options can be used to hedge another position. For example, if you’re long a stock and it starts to show signs of weakness (yet you don’t want to cut the position entirely), you could choose to buy put contracts to offset the potential downside.
- Defined Risk
When buying options, you can never lose more than the amount of premium you spent to enter the trade. This allows you to create a defined-risk strategy around options contracts.
And speaking of defined risk …
The Truth About Shorting Stocks and Buying Puts
Your risk/reward profile is particularly important to consider when attempting to short a stock.
Tim Sykes has been warning traders about the risks of shorting stocks for years. And he’s right to do so.
I agree with Sykes — shorting common shares is just too risky. In fact, the risk is infinite, because stocks have no limit on how high they can go (theoretically).
And this is where options come into play …
If I want to bet on the downside of a stock, I use put options instead of shorting common shares.
Because I’m able to define my risk.
I can sleep like a baby holding puts overnight because I’ll never lose more than my principal investment in the position.
On the other hand, if I hold a common-share short position overnight, I can potentially lose more than I initially bet on the trade.
The way I see it, traditional short selling isn’t a very good option (excuse the pun) for small-account traders.
I suggest using put contracts to bet against stocks (without risking your entire account on it).
Closing Thoughts
If you’re anxious to grow your account quickly, slow down. Keep things in perspective. Zoom out and look at the big picture. Understand where you are in your trading journey.
If you take things one step at a time and approach each step of your journey with discipline, you’ll be well on your way to your dreams of one day trading a massive account.
I’ll say it once more …
Start small, dream big!
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