Advice for trading a small account and not getting killed by commissions

[adrian88 12]

Hello all! First post here..

 

I recently went live Monday with CMEG and have quickly realized the differences between SIM and LIVE. I've started off small with longing/shorting 100 shares per trade. In the last two days it seems most of my winners are around $10 dollars; however, each trade carries a $3.39 commission off the bat. It seems the commission structure is a flat fee under a certain amount of shares. 

 

If I win two trades and have two small losers I am red due to my commissions. Take for example

Trade 1: Win $8.00

Trade 2: Win $10.00

Trade 3: Lose $5.00

Trade 4: Lose $5.00

 

That's a total P&L of $8 but with 4 trades that's (3.39 x 4) = $13.56 in fees and thus brings me to a red day of -5.56

 

I have a total of 1000 in my account and so my targets for profit are .05%-1% of my account. That is $5 or $10 respectively. In order to be profitable with this account size either all of my trades have to be winners or I have to risk more. I'm a bit frustrated as it seems like trading a small account and minimizing risk is a lot more challenging than trading a larger account would be. A 10 cent movement for me will yield $10 dollars while a 10 cent movement for 500 shares will yield $50 dollars and give you much more head room to absorb commission fees.

 

I'm not sure where to go from here other than going back to sim and saving enough to be able to risk more money and keep my risk size low, or just risk more now.

[owandre 4]

Hello Vamp10988,

 Have you seen this post on CMEG?

 It has all the info to get you to use the lower commission structure. You just have to email them and use the code to get it.

 Hope that helps.

Trade safe,

 Otis

[Bailey Nevener 83]

It is extremely important to do the math (as you are doing) and actively acknowledge the logical barriers to your success.

In short, you will either need to risk more per trade, lower your commissions substantially, or get a larger account so you can risk a lesser percentage per trade and overcome commissions.  

Those that say that commissions should not be considered often are parroting successful traders with huge accounts.  Those successful traders that say commissions are not a factor often did not start with a small account (sub $5,000) to build up their current account.

The logical way I see it, is to move your account to a commission from broker like TD Ameritrade and swing trade or invest to $25,000.  Or at the very least to $5,000 for CMEG.  

It’s not as hard as you may think.  The investing route is easier in my opinion.  (with regular, small deposits) With a few high probability ace-in-the-hole swing trades that come along every couple weeks you will build up a comparably sizeable account.

Just do your research on the company(s) you invest in.  I’ve made two small accounts go the distance to $25,000 so far.  This will probably be my last time doing so.

The two separate times I made it there was with a $5,000 account and a $3,000 account.  (Although once I got the $5k account up to $25,000 I blew it up horrifically with a YOLO options trade)  Both of the accounts took a couple months to get there fortunately, but I was psychologically willing in both cases to wait 2+ years.  

Once I paid off my high interest debt with the $3,000 account, (turned into $37k) I started my current one with $8,000 and am about to get this third one over $25k in the next couple months. 

The reason I paid off the debt was specifically because it was high interest, and I had big life expenses at the same time that needed attention.  Had I been able to keep it, I would be well over $60k by now with the same account only 4 or 5 months later.  Oh well lol, won't ever have that problem again.

The current one I'm on is at $18,000 after about 8 months,(starting from $8,000) but I was much less aggressive with this account because I am tired from the psychological "freak out" I had to pay off my old debt.  Maybe I would have already made it to $25,000 if I had been really aggressive, but for me at this point it’s just not worth the stress.  No debt?  No rush.

The hard route that a lot of people recommend is to become amazing at trading with a small account, harness your iron will, (while you have no money) and use 3 day trades on a rolling schedule in a pure cash account using options or something similar with a margin stock trading account.  

In my opinion this is substantially harder and frankly, slower, since blowing up or getting locked out 90 days before hitting $25k is almost inevitable.  Aiman did this apparently, and I also did this for the first half of my $3k account.  But I feel that this was an unnecessary complication for me and an exercise of Aiman’s brilliance.

Anyone who says that you should chop it out and pay tuition to the market in the form of learning is masochistic, psychopathic, or unprofitable, but most importantly, they are not thinking about what they are saying, so they are first and foremost, unreasonable.  Life is hard enough without knee jerk advice that can affect the outcome of your future.

Edited September 21, 2021 by Bailey Nevener

[_cameaton 0]

On 9/20/2021 at 2:36 PM, Bailey Nevener said:

It is extremely important to do the math (as you are doing) and actively acknowledge the logical barriers to your success.

In short, you will either need to risk more per trade, lower your commissions substantially, or get a larger account so you can risk a lesser percentage per trade and overcome commissions.  

Those that say that commissions should not be considered often are parroting successful traders with huge accounts.  Those successful traders that say commissions are not a factor often did not start with a small account (sub $5,000) to build up their current account.

The logical way I see it, is to move your account to a commission from broker like TD Ameritrade and swing trade or invest to $25,000.  Or at the very least to $5,000 for CMEG.  

It’s not as hard as you may think.  The investing route is easier in my opinion.  (with regular, small deposits) With a few high probability ace-in-the-hole swing trades that come along every couple weeks you will build up a comparably sizeable account.

Just do your research on the company(s) you invest in.  I’ve made two small accounts go the distance to $25,000 so far.  This will probably be my last time doing so.

The two separate times I made it there was with a $5,000 account and a $3,000 account.  (Although once I got the $5k account up to $25,000 I blew it up horrifically with a YOLO options trade)  Both of the accounts took a couple months to get there fortunately, but I was psychologically willing in both cases to wait 2+ years.  

Once I paid off my high interest debt with the $3,000 account, (turned into $37k) I started my current one with $8,000 and am about to get this third one over $25k in the next couple months. 

The reason I paid off the debt was specifically because it was high interest, and I had big life expenses at the same time that needed attention.  Had I been able to keep it, I would be well over $60k by now with the same account only 4 or 5 months later.  Oh well lol, won't ever have that problem again.

The current one I'm on is at $18,000 after about 8 months,(starting from $8,000) but I was much less aggressive with this account because I am tired from the psychological "freak out" I had to pay off my old debt.  Maybe I would have already made it to $25,000 if I had been really aggressive, but for me at this point it’s just not worth the stress.  No debt?  No rush.

The hard route that a lot of people recommend is to become amazing at trading with a small account, harness your iron will, (while you have no money) and use 3 day trades on a rolling schedule in a pure cash account using options or something similar with a margin stock trading account.  

In my opinion this is substantially harder and frankly, slower, since blowing up or getting locked out 90 days before hitting $25k is almost inevitable.  Aiman did this apparently, and I also did this for the first half of my $3k account.  But I feel that this was an unnecessary complication for me and an exercise of Aiman’s brilliance.

Anyone who says that you should chop it out and pay tuition to the market in the form of learning is masochistic, psychopathic, or unprofitable, but most importantly, they are not thinking about what they are saying, so they are first and foremost, unreasonable.  Life is hard enough without knee jerk advice that can affect the outcome of your future.

Have you grown these account with swing trading or options? If both, how much of each? How long did you paper trade before you tried growing these accounts?

[Bailey Nevener 83]

On 10/5/2021 at 6:42 AM, _cameaton said:

Have you grown these account with swing trading or options? If both, how much of each? How long did you paper trade before you tried growing these accounts?

All of my accounts were mainly grown with swing trading.  Significant advances were made through a few day trades with large R:R as well. 

I was on-and-off trading for about 3 years (but consistently listening / watching lectures about it) due to being in the Navy and going on deployments the whole duration. 

After I got out of the Navy, I had a solid 6 months to myself, and during that period I became consistently profitable.

The first of the accounts I grew was on the tail end of my time in the Navy, and the remaining two have been considerably easier to make now that I am no longer in that environment.

It is also worth noting that I don't use DAS when my account is under 25k.

Edited October 15, 2021 by Bailey Nevener