Many retail traders, especially new ones, do not have definite means of growing their accounts. Often, they will win some trades but have those winning turns-around moments disappear due to either not managing risk properly or because of trading during unfavorable conditions for the market. Where no structured plan is involved, frustration and burnout lead traders into accounts dwindling to an unacceptable level.
Volatile financial markets in 2024 create super enormous trading opportunities for account expansion by traders. However, this stormy weather calls for the right tools and strategies along with the right mindset to survive the turbulent seas. Such a company is the SMB Capital, one of New York City’s most prestigious proprietary trading companies. The firm has provided an opportunity to raise some of the world’s greatest trade performers through training on responsible trading.
To grow your account in a sustainable way, one needs to embrace the mindset of consistency, risk management, and mental wellness. This article breaks down three strategies that Carlton, a risk manager at SMB Capital, outlined as I look to grow my trading account responsibly in 2024.
4 Steps How to Protect Your Profits and Grow Your Trading Account
1. Protect Your Account
The first, perhaps most important rule for traders aiming to grow their accounts, is to protect your green days. That means that when you end a day in profit, it’s imperative to secure that win rather than risking losing all the gains in a less favorable market environment.
The stock market spends most of its time in non-trending conditions, with very little time in trending conditions. This implies most days will be in a choppy, unpredictable type of environment as a trader. Don’t try to force trades when things are choppy; simply make some small gains and leave them there.
Important Takeaways:
- Look to singles and doubles: Rather than trying to hit a home run each day, you should target small, incremental gains.
- Don’t give back your profits: If you have profited in the morning, do not attempt to catch all the remaining trades on that day once it has fallen into the unfavorable time of day, such as the middle of the day.
- Consistency works: A daily grind-making, say $100 a day over 20 trading days–can produce a very cool $2,000 a month. Experience and capital can then increase that steadiness to $1,000 a day or more.
The secret to keeping those green days comes from realizing when the market offers limited opportunities and it’s time to step aside even if you’ve had success earlier in the session.
2. Set Risk Limits Per Symbol
The next critical approach to growing your account for trading in the year 2024 would be to set per symbol risk limits, thereby dividing your daily loss limit among several specific stocks or symbols.
For example, if your daily maximum loss is $1,000, you might set a limit of $300 in any one stock you trade. Then, if that particular stock happens to not be doing what you wanted it to do in terms of the type of move you were expecting, you are less likely to overtrade the symbol and end up blowing your entire daily loss limit.
Why It Matters:
- It keeps you from overcommitting to a single stock and risking your entire day’s capital on a trade that’s not working.
- Avoid emotional trades: Limits per symbol will keep one to their plan and not fall into the trap of continuously trying the same stock after several failed attempts.
- Risk management: A per symbol risk limit can bring about discipline, because big losses on individual trades do not chase away overall gains.
Adhering to per symbol risk limits can allow the trader to avoid exposing himself to certain stocks that may exceed limits, which will prevent psychological strain and reduce drawdowns.
3. Have an Outlet Outside of Trading
One of the best but least known trading secrets is to have a life outside of the trading desk. Here’s Carlton’s third key for responsible growth of your trading account in 2024: find an outlet that keeps you balanced and refreshed outside of market hours.
Trading can be an all-consuming activity. If the trader does not have an outlet to decompress, the trader will either burn out or make silly emotional decisions out of frustration. Some traders are globe-trotting Dan G of SMB Capital or in the gym working out to clear the head – these are ways to successfully balance the trading activities with personal well-being.
Having an outlet:
- Higher concentration: Trading people who trade with some other hobby or activity other than trading usually come out to be more concentrated and better traders when they are at the desk.
- Psychological strength: Participation in activities other than trading revives mental batteries, providing psychological resilience for ups and downs of the market.
- Avoiding burnout: A balanced lifestyle helps traders avoid overtrading – the cure for losses and burnout.
If you bring a fulfilling personal life into your daily routine, then every day brings new vigor and direction for each trading day.
4. The Give-Back Rule: Lock In Gains
Aside from preserving your green days and limiting your risk, Carlton presents his final rule, often called the give-back rule. This includes knowing your average winning day and not allowing more than 30% of those profits to be given back during a session.
For example, if your average winning day is $1,000, you should have a trailing stop of 30% once you go past 1.5 times that amount, i.e., $1,500, so that you don’t lose an incredibly winning day into a loser’s day, which is demoralizing and not healthy for your psyche.
How it Works:
- Trailing stop on profits: You do the same thing to your entire profit for the day like when using a trailing stop on a single stock to lock in profits.
- Protect your psychology: Losing hard-earned profits hurts more than taking a small loss at the very beginning of the day. Using the rule of give-back helps you end the day with positive thoughts and less frustration.
If you apply the give-back rule, you will take the profit out of your best days and get your trading account on an escalator moving upwards.
Conclusion
There is a huge opportunity to grow your trading account in 2024, but only if used responsibly. You will only make consistent profits in case you follow a structured trading plan. This contains:
- Protecting your green days: The smaller gains lead to big results over time.
- This can make it easy to diversify the risk over a number of trades such that one is not experiencing any blow-ups and also avoiding big losses.
- There’s vent out of trading. Balancing is required in achieving long-term success.
- Apply the give-back rule: When trading well, give back some of the profits won as a way of ensuring that you never lose catastrophically by securing your winnings.
This will always end up helping you in having a healthy growth of your trading account and, therefore, a good foundation for long-term success in the markets.