Limited Trading Capital, Unlimited Beliefs
Shifting Your Perspective on Small Capital
Whatever you may call it, “less capital”, “small capital” or “limited capital” in your possession, it should not mean your thinking and prospects should equate to the first words in those phrases.
Having less capital at your disposal than you may desire or that you see others have online can be off-putting initially, but it most certainly shouldn’t be your reason for not pursuing a career in trading.
“How Much Do I Need?”
One of the most frequently asked questions we receive is “How much do I need to get started?”
The answer to that question is how much can you afford?
Starting with limited capital is not a setback, but rather an opportunity for a longer and more beneficial journey. It's not a negative, but a positive if understood correctly. It offers numerous benefits that may not be immediately apparent, but will become clear as you advance in your trading career.
Skills Before Capital
I am a strong believer in the reality that if you’re not yet in possession of the money you desire, it’s because you’re not yet ready for it and do not yet possess the skills necessary to acquire it; otherwise, you would have it. There’s no greater proof of this than with trading. Because if you did have the required skills, you would have the money you desire from trading.
Another truth?
Suppose you can’t successfully trade with limited capital and prove to yourself you can be consistently profitable with smaller amounts of capital. In that case, you will not be psychologically and emotionally ready to handle larger sums. The psychology of trading significant capital is significantly different to trading smaller sums. The numbers fluctuate faster, the quantities fluctuate aggressively, and it’s not something you can jump into if you’re not already in possession of money of that size.
Why Prop Firm Success Doesn’t Always Translate
This is why many traders are able to successfully trade with prop firms, but blow live accounts despite trading the exact strategy that made them successful on prop firms. When trading £100,000 on a prop (demo) account, you have no real attachment to the money, because losses are limited to a fixed percentage, and there’s no real money lost besides your payment for access to the account. Comparing this to trading £100,000 of your funds, the implications of mistakes and the consequential psychological aftereffects are pretty drastic.
This is what makes trading with limited capital perfect.
Starting Small
The likelihood is 99% that we start our journeys from a limited standpoint, as so few come from wealth in this world. Don’t fear this or consider it a limitation; view it as the best starting point you could receive.
Learning To Drive
Approach trading with the mindset of learning to drive a car. Just as you made mistakes when learning to drive, expect to make mistakes in trading. This is the only way to truly learn and improve.
How many mistakes did you make in the beginning?
How many times did you scratch, bump or crash your car?
How nervous were you during those close-calls and near-misses?
Can you imagine how much worse it would be if you had experienced this learning curve behind the wheel of a supercar or hypercar? Can you imagine how costly every error would be if you were driving a £1,000,000 car to practice? It would be irrational to start with what is considered the end goal for many.
This can be directly applied to trading.
The Cost of Early Mistakes
Trading is a journey of learning and growth, not immediate or consistent wins. Making mistakes is the only real way to learn and perfect your craft. In trading, mistakes also result in financial losses, especially during the first few years. However, starting with limited capital puts you in the best position to endure this process without suffering six-to seven-figure losses that could ruin your life.
Every newcomer to trading will experience the same hurdles and, most importantly, the same consequences of losses. Those who start with 6-7 figures endure the same; they lose significantly more.
Believe it or not, you’re at a greater advantage than those starting with larger capital because more often than not, they approach trading with the belief that their greater capital is a greater advantage, and they won’t lose it all. This quickly becomes a devastating shock when the same rookie errors lead to the same results, just with more fatal consequences.
I have seen it many times. People have come to me over the years expressing stories of how they’ve blown the entirety of inherited wealth or wealth acquired outside the markets. They thought their wealth was their safety, but the markets, unfortunately, have no remorse or care for this. It will take it all if given the opportunity to do so.
The Reason Most Traders Fail
The most significant contributing factor to the failure of most traders isn’t the limited capital they start with; it’s the length of time required to grow the funds in the safest manner possible, steadily. Most cannot stick to the timeline and look to take shortcuts, quickly trying to exceed the risk thresholds that are logical for their account size.
If you were instead to accept the reality that trading with anything less than £1,000 means you must focus on collective profits over several trades between £10 and £100, you wouldn’t be blinded by the fact it’s not a huge amount of money, you would be grateful that you’re on the journey to learning a skillset that will allow you to reap a return on investment far greater than any other savings account or high-interest account would give you in return, especially for the capital size at stake.
Many overlook this factor. If risk management is applied and adhered to, you can obtain a greater return more quickly than any other investment source, especially if you choose Forex or Crypto. What you earn is directly correlated to what you have. When you understand this, you will no longer look at what you don’t have, but instead appreciate what you do have and can obtain.
£1,000 to £1,000,000: The Time Factor
There’s no reason you cannot eventually grow £1,000 to £1,000,000 over a suitable period. However, this is the issue: it takes time to do it safely. Nobody wants to spend the time learning, nor do they ever want to do it safely.
One of the most challenging aspects of trading is managing our impatience. The desire for immediate success can lead to immediate failure. However, when you learn to appreciate the journey and what it brings, you no longer feel constricted by the urgency and concepts associated with time.
Trading is not a sprint, but a marathon. Understanding and accepting this will lead to a more successful and fulfilling trading career.
View your trading journey as a marathon, not a sprint. Appreciate the learning process and the growth it brings, rather than being consumed by the desire for immediate success.
The Power of Compounding Small Gains
If you only have £1,000 right now and dream of having millions, if I told you in 5-10 years you would have £1,000,000 by simply risking only 1% a day and aiming to make just 1% a day, you would be more likely to see how realistic this actually is, because it genuinely is.
The problem is enduring this process endlessly over the period of many years, expressing gratitude for the smaller profits being made. It won’t be until the 2nd year that the money really starts to compound and reflect serious numbers.
It doesn’t seem plausible at the moment, because you cannot comprehend the timeframe or satisfaction of being grateful with a £10 to £100 profit on a weekly basis. However, you must remember that every growth in your balance is a result of the 1% risk per trade, alongside the 1% reward. Always view it this way. Every profitable trade increases the balance.
With just 1% risk per day and a target of 1% profit a day, that’s a 5% increase in your balance in 5 days for the trading week. That’s a 20% increase in a month.
Managing Expectations in Trading
We have this expectation of trading that it should be quick, fast, exhilarating and big money at the click of a finger. It certainly can become that, but it’s just not realistic until your balance already reflects big money.
It’s not the good trades that get you to your destination; it’s the risk management that serves as the core of the entire trading procedure.
The trading process also shifts as you start to obtain an account balance that can begin covering your life expenses and outgoings for day-to-day survival. It’s no longer a game of growth; it’s a game of sustainability.
There’s no better form of conditioning than to adopt this practice when the balance doesn’t yet reflect the reality of survival. This is precisely how you naturally progress psychologically into the correct mindset that adapts to trading larger amounts of capital.
The Only Real Limitation
Remember, the only limitation in this game is your mindset.