The Basics of Cryptocurrency Futures Trading: How to Trade Futures with a Small Account

Important Takeaways:

  • By establishing a reasonable profit target, you will be less stressed by the outcome of each trade, which should help reduce trading stress and have a positive impact on your long-term results.

  • Risk is proportional to the size of your account. Never risk more than 5% of your total capital in a single trade.

  • Only trade high-probability setups. Before entering a position, conduct a strategic analysis of the risk-to-reward ratio and trade fundamentals.

  • Profits should be compounded. Instead of withdrawing profits, reinvest them to grow your capital to the point where it can supplement or even replace your income.

Today, we'll look at some hints that can help your futures trading career get off to a good start. Before we begin, please keep in mind that these are not financial advice, but rather useful philosophies to consider before committing to trading.

Set realistic expectations

First and foremost, it is critical to establish realistic goals and expectations. Trading is extremely difficult for anyone. It's a game with a lot of chances to win and a lot of chances to lose. Even Wall Street's legendary traders have suffered significant losses during their careers, despite the fact that they are supposed to have their finger on the pulse of trade.

Setting realistic profit targets is critical. Even the most successful hedge funds and fund managers struggle to earn more than a few percent per month on a consistent basis. Novice traders with a $5,000 capital base should not expect to earn $5,000 per month or even cover their living expenses. Instead of aiming for 100% returns every month, a more attainable goal is to consistently grow by 1-2% per month.

By establishing a reasonable profit target or expectation, you will be less stressed by the outcome of each trade, which should reduce trading stress and have a positive impact on your long-term results.

Long-term success necessitates a strategy, and being proportionate with funds is an important component of that strategy. When done correctly, gradually growing a small account into one that can sustain you and you alone is a worthwhile accomplishment.

The best way to begin any endeavor is to honestly assess your current capabilities. When it comes to trading, the most important consideration is the size of your account.

Risk is proportional to the size of your account

Re-evaluate your financial perspective. Each dollar should be valued at 100 times its actual value. So, if you have a $1,000 account, you should be concerned about losing more than $10 (or 1% of your account value). In fact, professional traders generally adhere to the rule of not putting more than 5% of their account value at risk per trade. A professional trader with a $1 million account would never risk more than $50,000 on a single trade.

This is a long-term strategy that requires you to approach each trade with a plan. The strategy upholds values that protect your funds, such as cutting off losses early, sets realistic expectations, and safeguards your emotions.

Finances are frequently associated with self-esteem, optimism, fear, and, to a lesser extent, physical health. Remember that it doesn't matter how big someone else's account is or how much they trade, win, or lose. Your trades are only for you, and you should concentrate on building for yourself rather than competing.

A strategy that treats each dollar (or any smaller denomination that corresponds to your budget) as a valuable piece of your portfolio will result in conservative emotions and focused strategies that guide entry and exit points. Crypto futures are ideal for this because investors can trade with fractions of a dollar or whatever currency they have on hand.

Don’t Withdraw Funds Out of Your Account

When you're first starting out, a seemingly simple tip is to leave your money alone. Do not remove them from your account. Because you are attempting to build your wealth, you will require every brick you possess in order to gradually introduce larger and larger risks per trade. As your funds grow, you'll be able to supplement or even replace your income (assuming you stick to your strategies and values).

Taking money out of your account also disregards the value you place on each unit of account, devaluing the other ethics you would apply to your trading. Trading is a long-term game that should be respected above and beyond quick wins. In fact, depositing money into your account whenever possible is a good idea.

Of course, life can be unpredictable, and the value of trading can be easily replaced by something else that may occur, such as emergencies or other pressing demands. Let's hope this doesn't happen!

Trade Only High-Probability Trade Setups

Only trading with high-probability trade setups is a key feature that goes hand in hand with trading at low volumes (and with appropriate leverage). This can be determined by conducting a strategic analysis of the fundamentals on which you rely. Support and resistance, trends, market volume, Wyckoff shaping and timing schemes, recent market shifts etc. When the analysis agrees with your instincts, it is more reasonable to apply more confidence to a trade. As you learn how patterns affect market psychology, institutional influences, and much more, the analysis process should help you further rank risk probabilities in the future.

Only use high risk in extremely specific scenarios, and even then, be wary of your fundamental values. Will it be worth it if the trade goes wrong and you lose on high leverage? If the response is yes, go on and do it.

Compound Your Profits

Compounding your profits is a technique that can help accelerate account growth. When you have successfully executed a trade based on a high probability setup, you can feel confident in continuing your winning streak. If you set a new stop loss that favors the trend you followed in your first trade and use a high risk/reward ratio, you may be able to increase your profits even further.

This should be a last resort, as applying more leverage to even a 2% investment at a 10:1 leverage ratio can cost you 20% of your portfolio. Winning it could also land you a nice chunk of money to cheer about. Setting yourself up for high win probabilities can also set you up for continued positive momentum.

In conclusion

Starting a small crypto futures trade is a similar task to launching one with millions of dollars. The same principles apply, and each fund that you risk should be handled with caution. Every investment should be based on a high probability of success and should never be leveraged to the point where it consumes a significant portion of your account.

Trading can become quite heated. Emotions, as well as other factors, can easily become involved. However, it is critical to remember where you started, to learn from your mistakes, and to think long-term. Even if you're trading in order to build a legitimate futures trading career, it's important to remember that money isn't everything in life. It doesn't matter if you lose or miss a trade if you don't learn from it. Winning a trade is only important if it helps you get closer to your goal. In either case, growth practice is more important than growth itself. When it comes to trading, practice makes perfect, and your dedication to learning and appreciation for opportunities will guide you forward.