Choosing Between 3 Trades When You Only Have Capital for One

Table of Contents

• Why ‘Taking All of Them’ Is Not an Option
• The Core Rule: Capital Is a Constraint, Not a Limitation
• Steps for Choosing Crypto Trades When Your Capital is Limited
• Step 1: Eliminate Trades That Fail the Risk Filter
• Step 2: Assign Each Trade a Setup Quality Score
• Step 3: The Capital Efficiency Test
• Step 4: Correlation and Redundancy Check
• Step 5: Final Tie-Breakers When Two Trades Are Equal
• The 60-Second Trade m Checklist
• Common Mistakes Traders Make When Choosing Trades
• FAQs

Why ‘Taking All of Them’ Is Not an Option

When you see multiple valid setups at the same time, the most common instinct is to spread your capital across all of them.

In reality, this is one of the fastest ways capital-constrained traders destroy performance.

Professional traders avoid this for clear, measurable reasons.

1. Capital Dilution:

If you have ₦500,000 and split it across three trades, each trade becomes too small to matter. A 5% gain on ₦166,000 is ₦8,300. Fees, slippage, and spreads can easily eat up a large portion of that.

2. Higher Fees and Slippage:

Across several exchange fee structures, active retail traders lose between 0.2% and 0.6% per round trip in fees and slippage. Taking more trades increases this cost.

3. Emotional Overload:

Managing three trades at once increases stress. You start reacting instead of following your plan. Research in behavioural finance shows that decision quality drops as cognitive load increases. This is exactly the case in crypto trading.

4. Poor Risk Concentration:

Instead of one well-defined risk, you now have three weak risks. This often leads to moving stops, closing early, or holding losers too long.

5. Execution Failure:

Most retail traders cannot manage multiple entries, stops, and exits at the same time. This results in manymissed alerts and late reactions.

The result is usually worse performance than taking one high-quality trade.

The Core Rule: Capital Is a Constraint, Not a Limitation

Most retail traders believe they are underperforming because they do not have enough capital.

The problem is rarely how much capital you have. The problem is how you deploy it.

Capital is a constraint. And constraints, when used properly, create discipline, clarity, and better decisions.

Why Professionals Respect Capital Constraints:

In professional trading environments (like prop firms, hedge funds, and desks), capital is always constrained. No trader is allowed to take every trade they see, even if the firm manages millions of dollars.

Why? Because unlimited capital leads to sloppy decision-making.

When capital is limited:

• Every trade must justify its existence
• Risk must be clearly defined
• Execution must be deliberate

That way, trades are built on quality over quantity.

Fewer Trades Force Higher Standards:

When you can only take one trade, your standards rise automatically.

You start asking better questions like:

• Is this setup truly clean, or just acceptable?
• Is the risk worth locking my capital?
• Is this the best use of my money right now?

This is how professional traders think. They do not ask if the trade can work. Instead, they ask if it is the best trade available given my capital.

Capital Efficiency Matters More Than Trade Count:

Many traders measure performance by how often they trade. However, professionals measure performance by capital efficiency.

Capital efficiency is determined by answering simple but critical questions like:

• How much capital did this trade require?
• How long was that capital tied up?
• What return did it generate relative to the risk?

For example:

• A trade that locks ₦500,000 for 10 days to make ₦50,000 is less efficient than a trade that locks ₦300,000 for 2 days to make ₦40,000.
• Even if both trades are “winners,” one is clearly superior.

Constraints Reduce Emotional Trading:

One of the biggest benefits of limited capital is the clarity it brings.

When you know you can only take one trade, you stop chasing marginal setups, reacting to social media noise, or forcing entries out of boredom.

This reduces FOMO-driven decisions.

Quality Beats Quantity Always:

There is a reason experienced traders often say, “You don’t need more trades. You need better trades.”

A single well-structured trade with a clear stop, strong confluence, and efficient capital use can outperform weeks of random activity. Especially when you are dealing with limited deployable capital, unstable liquidity conditions, and fee sensitivity.

Trying to trade like a large fund without large capital is a mistake. Trading like a capital manager is the solution.

Steps for Choosing Crypto Trades When Your Capital is Limited

Step 1: Eliminate Trades That Fail the Risk Filter

For professionals, every valid trade must pass a basic risk filter. They ensure that:

• The stop level is clear and fixed
• The risk is small enough to survive being wrong
• The reward is meaningfully larger than the risk

A common minimum is a 1:2.5 risk-to-reward ratio. That means if you are risking ₦10,000, the trade should realistically offer ₦25,000 or more in upside.

Given that even good traders lose trades regularly, a structure like this allows you to be wrong often and still grow the account.

Any trade that requires later management or “seeing how price reacts” is not ready. It is removed immediately.

At the end of this step, you are no longer choosing between three trades. You are choosing between only the ones that deserve attention.

Step 2: Assign Each Trade a Setup Quality Score

Each trade is scored using the same criteria by asking questions like:

• Is the market structure clear?
• Does it align with the higher timeframe?
• Is there obvious liquidity involved?
• Is volume supporting the move?
• Are entry, stop, and target clean and obvious?

Each category gets a simple score, depending on its strength or weakness.

When you lay the trades out side by side, you easily see the patterns. One trade usually stands out. Another looks decent but slightly messy. A third feels weaker once it is forced through the same lens.

This step slows you down just enough to make a better decision, without paralysing you.

This way, you are choosing the trade that scores highest on quality.

Step 3: The Capital Efficiency Test

Capital efficiency measures how much return a trade produces relative to the capital and time it consumes.

You can test capital efficiency by checking the following.

1. Capital Required vs Expected Return:

Two trades may both offer good R:R, but one may require significantly more capital.

Example:

• Trade A needs ₦500,000 to make ₦80,000
• Trade B needs ₦300,000 to make ₦60,000

Trade B is often superior, especially for small accounts.

2. Duration of Capital Lock-Up:

How long will your capital be tied up?

• A 2-day trade frees capital quickly
• A 2-week trade blocks other opportunities

Longer trades must justify the lock-up with higher efficiency.

3. Opportunity Cost:

While capital is locked in one trade, you cannot deploy it elsewhere.

Efficient traders prefer setups that:

• Resolve faster
• Allow rotation
• Reduce stagnation

4. Volatility vs Control:

Highly volatile trades may look attractive, but often require:

• Wider stops
• Smaller position sizes
• More emotional management

Efficiency is about controlled returns, not excitement.

Step 4: Correlation and Redundancy Check

This step protects you from false diversification.

Many traders believe they are spreading risk when they are actually stacking it.

To confirm, ask these questions:

• Are these trades driven by the same market narrative?
• Do they involve the same base asset?
• Will they likely move together?

In crypto, correlation is high. BTC, ETH, and major altcoins often move in the same direction during market-wide moves.

If trades are correlated, it’s best not to take all of them. Only choose the cleanest expression.

That means:

• Best structure
• Tightest stop
• Highest liquidity
• Cleanest invalidation

One clear trade is better than three redundant ones.

Step 5: Final Tie-Breakers When Two Trades Are Equal

Sometimes, two trades survive all filters. This is where you remove subjectivity completely.

Use tie-breakers that favour execution quality, not potential upside. These include:

1. Cleaner Invalidation:

Choose the trade where:

• The stop is obvious
• The reason for failure is clear

Ambiguous stops lead to hesitation and rule-breaking.

2. Lower Emotional Load:

Ask yourself:

• Which trade will require less babysitting?
• Which trade allows me to walk away?

Lower emotional demand improves execution.

3. Better Liquidity:

Higher liquidity means:

• Tighter spreads
• Less slippage
• Cleaner fills

This matters more than most traders realise.

4. Simpler Management:

Simple trades are managed better.

If one trade requires multiple partials, constant adjustments, and complex monitoring, and the other does not, choose the simpler one.

The 60-Second Trade Checklist

Step 1: Does the Trade Pass the Risk Filter?

This is always first.

Ask:

• Does the trade meet my minimum risk-to-reward ratio (e.g. 1:2.5 or higher)?
• Is the stop loss clearly defined and fixed?
• Does the stop risk fall within my capital rules (e.g. 1–2%)?

If any answer is no, the trade is eliminated immediately.

Do not continue to the next step.

Step 2: Is the Invalidation Clean and Obvious?

You must be able to answer this in one sentence. If the price reaches this level, the trade idea is wrong.

If the invalidation:

• Is vague
• Depends on reaction
• Requires “management”

The trade is not ready.

Clean invalidation leads to clean execution.

Step 3: Does This Trade Score Higher Than the Alternatives?

If you are choosing between trades, rank them.

Ask:

• Does this setup score higher on structure, confluence, liquidity, and clarity?
• Is it objectively better, not just more attractive?

If another trade scores higher, this one is removed.

The highest-quality setup earns priority.

Step 4: Is Capital Being Used Efficiently?

Ask:

• How much capital does this trade require?
• How long will that capital be locked?
• Is the expected return worth the lock-up?

If a trade ties up capital for too long with limited upside, it fails.

Efficiency matters more than frequency.

Step 5: Is This Trade Redundant or Correlated?

Ask:

• Is this trade essentially the same idea as another?
• Will they likely move together?

If yes:

• Choose the cleanest expression
• Remove the rest

Correlation is not diversification.

Step 6: Can This Trade Be Executed Cleanly Right Now?

This is the final check.

Ask:

• Is liquidity sufficient?
• Can I enter, set stops, and set targets without rushing?
• Can I manage this trade calmly?

If execution feels rushed or messy, step away.

A good trade taken poorly is still a bad trade.

Common Mistakes Traders Make When Choosing Trades

1. Choosing Based on Excitement, Not Quality:

Excitement is often mistaken for quality. Fast-moving trades usually have worse entries, wider stops, and offer poorer execution

Professional traders choose calm, boring setups because they are easier to manage and more reliable.

2. Following the “Social Media Trade”:

Social media amplifies bias, not accuracy. By the time a trade becomes popular, risk is often worse, entries are late, and liquidity is already used.

3. Ignoring Stop Distance Because the Setup Looks Good:

A trade with a bad stop is not a good trade, no matter how perfect the chart looks.

4. Overestimating Conviction:

Many traders confuse confidence with edge. Markets do not reward conviction. They reward structure, risk control, and execution.

5. Splitting Capital to Avoid Regret:

Instead of choosing a single effective trade, traders split capital across two or three setups, reduce position size, or reduce impact.

This creates the illusion of safety while guaranteeing inefficiency. Regret avoidance is not risk management.

6. Forcing a Trade to Avoid “Missing Out”:

Some traders know none of the trades fully meet their criteria, but they take one anyway.

Why? Because sitting out feels like failure. Meanwhile:

• Not trading is a position
• Preserving capital is a win
• Discipline compounds over time

Professional traders are comfortable doing nothing when conditions are not right.

7. Overcomplicating the Decision:

At this stage, some traders add more indicators, confirmations, or opinions.

However, this does not improve decisions. It delays them.

Good frameworks simplify choices. Bad frameworks create confusion. If a decision requires excessive thinking, something is wrong.

8. Treating All Trades as Equal:

Not all valid trades deserve capital. Some trades are acceptable; others are exceptional.

Failing to prioritise leads to random allocation and inconsistent results.

Always think like a capital manager.

Do not chase every setup. Allocate capital deliberately. Respect constraints.

One good trade executed well is better than three trades executed poorly.

👉 Use Obiex to choose better trades, execute faster, and stay disciplined.

FAQs

Q1. How do traders choose between multiple setups?

By filtering risk first, then ranking setups objectively.

Q2. What risk/reward ratio should I use?

Many disciplined traders use a minimum of 1:2.5.

Q3. Is it better to take one trade or many?

With limited capital, one high-quality trade is usually better.

Q4. How do I manage limited trading capital?

By focusing on capital efficiency and risk control.

Q5. What is a setup quality score?

A numeric way to rank trades using objective criteria.

Q6. Why does correlation matter?

Correlated trades increase risk without increasing opportunity.

Q7. How much should I risk per trade?

Many traders risk 1–2% of their capital per trade.

Q8. What causes trading decision paralysis?

Too many options and a lack of a clear process.

Q9. Can this framework work for intraday trading?

Yes. It is designed for fast decision-making.

Q10. How does Obiex help with execution?

By providing fast order placement, clear sizing, and reliable execution tools.

Disclaimer: This article was written to provide guidance and understanding. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.