This volatile market can be great for people with millions or billions in capital in play, with trading desks that can play bulls vs. bears, but it’s murder for small investors with a few thousand dollars at work in the markets, and who can’t be behind a desk every minute the markets are open. 

That’s why I started the “not-so-top-secret” small portfolio project I’ve been talking about these days. 

I wanted to perfect some strategies and techniques that anyone (well, anyone who’s not BlackRock or Vertu) can use to keep their money safe and grow it quickly under the most brutal market conditions.  

And I wanted to get the results into your hands ASAP because I think my findings are going to help you double your account in this brutal market. 

I was able to 4X a $30,000 stake and turn it into $125,000 – and I’m sure you can, too.

Here’s what I’ve got for you – three things you can do right now do

Look for Trades in the Right Places

When you are looking for a trade, knowing where to look is a big part of the battle. In my experience, Relative Strength is the place to start.

We’re not talking the Relative Strength Index (RSI), where a stock is just overbought or oversold. We are talking the Relative Strength of a stock

When using Relative Strength, we’re looking at how the stock stacks up to others in its sector. That said, I tend to not just look at the stocks that are outperforming others in the sector but also the ones that are underperforming – and here’s why.

The outperformers are a fun time, of course, because they’re the ones pulling the rest of the sector up and are good for a quick buck. But the real magic happens where people don’t want to look – the underperformers.

The underperformers are the ones resisting the market trend. That’s a lot of potential energy being built up, and when they go, that’s when you’ll see a move that will yield well for your portfolio. Think of hooking a rubber band around your thumb and pulling it back to your elbow – release it and you’ll see what I mean. 

When you’ve found a stock to trade, make sure you stick with liquid options with lots of open interest; you don’t want to get stuck in a trade because there are only three other people in the entire market for it. A liquid option will help you let that stretched rubber band fly freely. 

There are a few other additional indicators to look at, and I’ll run you through those on my morning show, but sticking with liquid options in the top and bottom 10 stocks is the most important thing here. 

When you’ve got a stock picked out, it’s time to think about how much of your precious capital you want to put to work on it. That’s where allocation comes in. 

Keep Your Cash Allocations and Position Sizes Small

The old rule of thumb for traders and investors was to never put more than 1% of your total cash value into any given trade. 

That’s fine if you’re Thurston Howell III, but for most of us, it’s unrealistic right now, with budgets stretched to the max. 

In a small account, you need to make sure every last cent is working its hardest, and I’ve found putting 10% of the portfolio into a trade is the way to go – usually. If the trade is a little riskier, drop that down to 5%. 

Be prepared to take profits off the table in slow steps – close out 50% of the trade at a time, or 25% if it’s riskier. 

These are rock-solid risk management principles in any situation, but they’re absolutely critical for folks with small accounts who need to keep their capital safe and sound. 

How long you keep that money at work is important, too. 

Keep Your Holding Periods at 10 Days or Less

In some of my own trading research services, we aim to be in and out of our trades in about three weeks or so, our last 48 consecutive trades have been in the green. 

But, smaller accounts need different tactics. When you’re dealing with the top and bottom 10 stocks, you’ve got to adjust accordingly. 

In my experiment here, I found 10 days to be just about perfect for maximizing the return on the capital I deployed. I’ll get into the details on my show, but for now, it’s enough to say that any shorter and I’d miss out on profits, and any longer would expose me to reversals.  

That said, reversals happen, even to the best of us. It’s important we keep losses small when they happen, especially with small accounts. 


Set Profit Targets and a 30% Hard Stop

Setting a profit target is virtually self-explanatory – decide ahead of time how much money you should expect to make on a trade and stick to it. Say you think a trade is good for a double, a 100% gain. When it hits 100%, bail. Don’t wait around for 110% or 120% returns, because chances are they’re not in the cards – “pigs get slaughtered” is a Wall Street cliché for a really good reason. 

In most of these experimental small-account trades, I targeted returns in the 50% to 75% range – enough to grow capital slowly and steadily. I wasn’t disappointed, and my commonsense approach ended up putting $95,000 in my pocket. 

And it works the same way on the downside, too. 

I’m amazed by how many folks don’t know stops exist. I’ve read horror stories of people waiting around until expiration just hoping a trade will turn around for them… and it almost never does. 

Hard stops automatically take you out of losing positions once you lose your “risk appetite” on a trade. They take all kinds of dangerous emotions out of your trading, particularly that “It’s about to turn around, I just know it” emotion. 

The thing about stops, though, is, if you set them too tightly, you’re not giving yourself enough runway for the trade to actually work out – 5% and 10% swings on the road to 100% gains aren’t really uncommon, but if you’d set your stop at 5%, you’d be walking away too early. 

Setting it at 50% would be a mistake, too. In my decades of experience, 30% is just about the ideal for a hard stop, with plenty of room to run, but enough cushion to keep most of your capital safe. 

If you follow these rules for trading a small account, you will undoubtedly see growth; I have, to the tune of 316% in this experiment alone. 

Now, as I mentioned before, there are a few finer points to go over with the strategy, all of which I cover as a part of my Penny Hawk newsletter.

I’ve enjoyed being able to spend the weekend with you, and I hope I have taught you a thing or two.

maybe I’ll even see you in the room from time to time, come say hello, I promise I don’t bite.