{"id":7301,"date":"2013-08-29T05:18:46","date_gmt":"2013-08-29T12:18:46","guid":{"rendered":"http:\/\/www.tradingheroes.com\/?p=7301"},"modified":"2024-03-08T22:09:39","modified_gmt":"2024-03-09T05:09:39","slug":"how-to-scale-your-trading-from-500-to-5000000","status":"publish","type":"post","link":"https:\/\/www.tradingheroes.com\/how-to-scale-your-trading-from-500-to-5000000\/","title":{"rendered":"How to Scale Your Trading From $500 To $5,000,000"},"content":{"rendered":"

Rafael told me a story<\/a> about how a woman he knew who was able to double her trading account once every two or three months.\u00a0 Truly a rare talent.\u00a0 This got him excited and he raised some money from investors to back her.<\/p>\n

You would think that more money would mean more profits, infinite wealth and “happily ever after”, right?<\/p>\n

Wrong<\/em>.<\/p>\n

At first, she almost lost the entire account.\u00a0 Then she got herself together and finally made it all back, finishing with a small profit.\u00a0 But the volatility was too high and the investors withdrew their money.\u00a0 But how is this possible?<\/p>\n

If you can double a $10,000 account, doesn't that mean that you can double a $10,000,000 account?<\/p>\n

\"Confusion!!!!\"
Why is everything so confusing with a bigger trading account?!<\/figcaption><\/figure>\n

Not necessarily.\u00a0 The reason is usually because you are thinking about the dollar amount, relative to your financial situation.<\/p>\n

Here is what I mean…<\/p>\n

The Theory Of Dollartivity<\/h2>\n

\"Money<\/p>\n

Trading a much larger account can really start to mess with your head, if you concentrate too much on dollar values.\u00a0 In the case of the woman Rafael was talking about, she was used to trading a $10,000 account and could comfortably grow that account on a consistent basis.<\/p>\n

However, when she was given much more money to trade, the dollar values started messing with her head.\u00a0 First of all, she saw this as a huge opportunity because nobody else had every given her a chance like this before.\u00a0 This made her nervous and led to second guessing and not trading like she did before.<\/p>\n

Second, and this is only speculation on my part, but the dollar values that she was dealing with were probably way out of her comfort zone, relative to here current situation.<\/p>\n

I call this the Theory of Dollartivity.<\/strong><\/p>\n

For example, let's say that you are making $60,000 per year at a job and you have a $10,000 trading account.\u00a0 Then all of a sudden, you get some investors and start trading a $5,000,000 trading account.<\/p>\n

Risking 1% of your $10K account per trade means that you are risking $100 per trade.\u00a0 If you are used to making $60K per year, then this is not a huge risk.\u00a0 But if you start risking 1% of a $5MM account, that is now $50K of risk per trade…almost the same amount that you make in an entire year at your 9-to-5!<\/strong><\/p>\n

See how that can really mess with your head?\u00a0 The money management is exactly the same, but dollar value, relative to your financial situation, comes into play.\u00a0 If you are in a trade and down $25K, you might start to freak out, when in reality, it is no different than being down $50 in your $10K account.<\/p>\n

So how can we overcome this?\u00a0 I'm sure that there are different ways to do it, but here is the easiest way that I have found…<\/p>\n

Why I Switched To Watching Pips<\/h2>\n

I have been thinking about this a lot lately and realized that there are times when I close out a trade because the dollar value scares me a little.\u00a0 This goes both ways, sometimes I'm afraid to lose my current gains and sometimes I think a loss is too big and close the trade too early.\u00a0 Then of course, the trade turns around and goes wildly in my favor.<\/p>\n

You know what I'm talking about.<\/p>\n

Therefore, I have started watching pips instead of dollar amounts. I changed the Oanda app on my phone<\/a> to only display pips and I will do the same for my Java client.\u00a0 This is what my iPhone app looks like now:<\/p>\n

\"The<\/p>\n

By only watching pips and current price action on the charts<\/a>, this has really helped me see the markets more objectively and make decisions based on what the market is telling me and not because I have an emotional attachment to the dollar value on my P and L.\u00a0 I feel that making this change will help me scale to trade any sized account because the experience will be very similar…<\/p>\n

…just watching pips.<\/em><\/strong><\/p>\n

Do you watch dollar value or pips when you trade<\/a>?\u00a0 I would be interested to find out, leave a comment below and let me know.<\/em><\/p>\n

###<\/p>\n

Photo Credits: Upside Down<\/a> | Money Heads<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Is trading a small account the same as trading a large one? Not always, here’s why…and how to overcome the problem. <\/p>\n","protected":false},"author":2022,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[725],"tags":[],"class_list":["post-7301","post","type-post","status-publish","format-standard","hentry","category-trading-psychology","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"\nHow to Scale Your Trading From $500 To $5,000,000 - Trading Heroes<\/title>\n<meta name=\"description\" content=\"Trading a larger dollar value can have a big negative influence on your trading. 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