common mistake for small accounts starting off and a simple fix – basics

Tldr: Prioritizing saving money aggressively while learning to trade supercharges your growth. While important to focus your effort on learning to trade, do not inadvertently deprioritize saving which is even more important early on. Set a monthly target and make sure you hit it.

Any serious trader will tell you that hitting 5% return every month is challenging. For those that think that’s low, its almost 80% annualized. If you still think it’s low, I’d like to smoke the same thing you are – hook ya boy up.

Yet, small accounts have an absolute gift available. You are able to hit and exceed 5% per month for some time with an amazingly simple strategy.

If you haven’t caught on yet, it’s not credit spreads, calendars, or diagonals. It’s saving your fucking money.

A $5K account needs to save $330/mo for the same compounded return.

New traders get sucked into thinking they’re going to trade their way to wealth, which I hope happens. But you can drastically increase your chances by simultaneously focusing on aggressively saving while learning to trade options.

There’s an interesting dichotomy between percent and gross returns in account sizes. A really strong return, 20%, doesn’t really move the needle with a $5K account. You can add guac to your chipotle a few times with the $1K – sick. Yet, saving just $500 equates to a 10% return.

Conversely, a conservative 10% return on $5M is half a million dollars. Plenty for the average person to live a pretty nice life.

What’s the fastest way to get there?

By not blowing your small account trying to make a meaningful gross dollar amount. A 100% return, which is incredible, on $5K effectively doesn’t matter in the long run.

A smarter way is to lean into the magical window you have, while it’s there and aggressively save your money. While doing this, papertrading or live trading with small amounts not pursuing the 100% return, which carries a high risk of ruin. But pursuing something aggressive but realistic, say 20-30%.

Saving has diminishing impact on the account. $500 saved on a $500K account is 0.1%. Doesn’t move the needle.

The idea is to lay the foundation by learning the fundamentals of markets, understanding options, building the backend structure and processes while aggressively saving.

If done effectively, just as you’re getting to the point where additional savings aren’t meaningfully impacting the account anymore, you have the backend structure to leverage your capital through trading.

While doing this, it’s the PERFECT time to tinker with different strategies, track your performance and optimize things. I think it makes sense to define what your trading objectives are, then build strategies that allow you to get there in varying market conditions. That’s the beauty of options.

I would create a strategy for: price up, down, vol up, vol down, structural effects. Etc.

If you’ve take trading seriously, focus on learning without continually throwing your money away, and set realistic goals – you put yourself is a much stronger position actually “make it”.

Pls don’t sleep on saving.