Both of these trading methods have successful cases in the market.

The most famous case of betting big to win small is Warren Buffett. Looking at his investment returns over the years, the average annualized return is around 20%. It may not seem high, but globally, there is only one person who has achieved an average annualized return of 20% for over 60 years, which is already a god-level return.

There are too many stories of betting small to win big, and I believe every friend who does futures trading has heard of Fu Haidong's story. In addition, the annual Futures Daily Live Contest creates myths of betting small to win big. In the 2023 Futures Daily Live Contest, the top 7 in the lightweight group all achieved a maximum principal return of more than 10 times, with the first place being 14 times, all examples of betting small to win big.

The blue rectangle on the right side of the chart indicates the return rate.

In fact, the model of betting small to win big is more attractive, as it is more in line with human nature, because most of us do not have as much capital as Buffett, and may only have some savings that can be used for trading, and we all want to make big profits with a small principal, which is understandable.

So, in this situation, how should we, as ordinary traders, choose?

Below, I will explain the specific situations of these two trading models to everyone, which I believe can help you make a choice.

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Let's start with betting big to win small.

This trading model has a low return rate, low capital utilization rate, low risk, and small trading drawdowns.

For example, using a fixed small number of contracts for each trade, or using a small proportion of the principal amount for stop loss (such as 1% of the principal for a single stop loss), this trading model will have a more stable mentality during the execution process, because the fluctuations of the amount of profit and loss are small, the amount of change is small, and the impact on the trading psychology is also small, without big ups and downs, making the execution of the trade easier.Firstly, this is suitable for traders with little trading experience and unstable mindsets. When we start trading, we should aim for practice and learning, cultivate good trading habits first, and then talk about making money. Therefore, try to aim for a small profit with a large investment, take it slow, and lower expectations. Start by running with a low position for a while, and once the trading is stable, consider increasing the position.

Secondly, if your trading mentality is poor, such as being hesitant to open a position when you see a good market, being indecisive about entering a trade, or closing a position too early when you should hold it, then your position should be even smaller. This will reduce your gains and losses, thus reducing your psychological pressure, which can greatly alleviate your mental issues and strengthen your execution in trading.

If you often see a good market but dare not take action, and cannot hold onto a position when you are right about the market, then trading with a small investment for a large profit is more suitable for you.

Now, let's talk about trading with a small investment for a large profit.

The small investment for a large profit model is more in line with human nature and human desires, after all, who doesn't want to get rich overnight? However, such a bold and aggressive trading style is actually more difficult. Let me show you the trading record statistics of the "Pursuit of Wind," the champion of the Light Weight Group in the Futures Daily.

In the chart, I have marked the maximum drawdown reaching 50.75%.

50.75% is a large drawdown ratio that most people find hard to bear. Imagine a 100,000 account losing to the point where it only has 49,000 left. Under such circumstances, not many people can continue to hold on because they are afraid and hesitant. If they continue, they might lose everything, but if they don't, they feel unwilling to accept the loss they have already incurred. In this situation, it may lead to trading becoming distorted.

Many traders have no psychological expectation when they encounter such a large drawdown. They think they can definitely make money and do not consider how much they might lose. So when it really happens, they panic and become fearful, which is a human instinct. Before truly losing so much money, they think they can bear a great loss, but when they really encounter it, they realize they are not as "strong" as they imagined.

So, the so-called trading with a small investment for a large profit, although the beginning and the trading process are very much in line with human nature, and the trading is very exciting, the results are often not satisfactory.

What we want in trading is a profitable outcome, the process and our feelings are not important, and many people have reversed the priorities.How should one choose between these two patterns?

I've discussed quite a lot earlier, and I believe everyone should have a sense of it by now.

However, some might argue that with the limited funds I have, if I don't try to make a big profit with a small investment, when will I ever make a fortune?

The fundamental issue here is that your capital is too small, so we need to find ways to increase it. Let me switch to an example: you save up money to open a business, and the capital required to open the store is 200,000. Would you expect to make a profit of 2 million with this 200,000? If the capital is not enough, should you continue to save money first, or should you just casually invest 20,000, regardless of whether it's a waste or not, in case you happen to make 200,000?

So the essence of trading is not much different from doing business. Once you switch to examples from real life, everyone can understand it instantly. It's just that the trading market often gives people a magical impression, as if everyone can make money, and everyone can make a lot of money.

Don't just throw money around in the market because you have little, and don't look down on those meager profits just because your principal is small.

Often, the trading market is littered with failures, built up by these small amounts of money. We should be smarter traders.