The Bane of Small Accounts

I don't trade stocks for a living... yet. I'd love to actually. But in order to trade for a living, one's account must be of sufficiently large size to achieve economies of scale in terms of brokerage costs and other fees. This is also to ensure that the gains would be sufficiently large in dollar terms to cover living expenses.

At the moment, I have about RM18,700 in my trading account, which by my standards is grossly inefficient.

Consider the following scenario that I have to go through before putting on a position:

Stock price: RM1.50
Pre-determined stop loss price: RM1.25
Target price: RM2

Dollar risk: RM0.25
Dollar reward: RM0.50


(Assuming I want a 2:1 reward to risk ratio)


The number of shares I can buy in order to adhere to the 1% equity risked per trade - (18,700*0.01)/0.25 = about 700 shares (rounded down and excluding brokerage).


Theoretically, my potential losses and gain would be:


700 shares x RM0.25 = (RM175)
700 shares x RM0.50 = RM350

BUT...

When you take the costs associated into consideration... assuming RM40 minimum brokerage, 0.03% clearing fee and stamp duty of RM1 for every RM1,000:

The net loss I would incur if the stop loss is triggered: (RM258.59)
While the net gain would be: RM265.26

Percentage loss as a proportion of total equity is 1.4%
While percentage gain is 1.4%

Which is NOT the 2% reward and 1% loss I was going for.

I'm sure I'm not the only one who's facing a similar problem. Below are a couple of solutions that I can think of that could remedy the above problem:

1) Increase trading account size (obviously) - Perhaps via saving more $ each month, not spending bonuses, pooling $ from family members and close friends, etc

2) Increase % risk per trade - instead of 1% .. increase it to 3-5% or more (be mindful that the larger the percentage risked, the bigger the potential of risk of ruin)

I'm still working on getting some funds from family members but that'd probably have to wait for now. The only option I have in order to achieve some sort of economies of scale is to increase my percentage risked per trade, which is not ideal at the moment.. considering the market condition.

So where does that leave me?

When there is nothing to do, do nothing - WB.