Start paying attention to position size

When it comes to risk management, everything counts. And defining the right size for your position plays a key role in the equation. Intuitively you might think the logic behind is pretty straight forward: if the position is a win, go big, otherwise, opt for a moderate size.

Not so fast cowboy. Successful trading is about all being methodic, that means finding a way to determine when to buy, when to sell and sticking to it for the long run. So... time to leave behind your carpe diem approach and get serious!

Defining the right position size is great to keep you inside your risk comfort area. Believe us, finding your position size is not as difficult as you might think. First, time to gather some info:

I get it. Writing down some numbers don’t seem to be an issue for you. So let’s get to work with a quick example so you understand first hand how to calculate position size.


Case:

Edward deposited 10,000 USD into his trading account. That’s his total balance. He is trading with EURUSD because he likes volatile trades. Also, he tries to risk nearly 200 pips (stop loss) per trade and no more than 1% of his total account balance.

*10,000 units of EURUSD equals to 1 mini lot.

Another case would be if your trading account currency is the same as your base currency:

*In order to convert EUR to USD we took a 1.5 exchange rate as an example.


Source link   Presented by Fort Financial Services

Related Columns

Is gold the best safe-haven asset?

From the thousand articles you read this week about the market, gold has been mentioned over and over again as a safe-haven asset. And yes, despite the metal has shown some pretty wild volatility...

Habits that reduce your Forex risks

There are plenty of blogs out there. Some good, some not. And there are thousands of publications talking about risk management. While many of those can be interesting to read, a very limited number...

A word on treasury yields

It's midweek and you are feeling exhausted already. But hold on for a minute before jumping into a cup of Chardonnay, check this out: the yield of the benchmark 10-year Treasury note...

Trading synthetic currency pairs

A synthetic cross currency pair refers to an artificial combination of currencies usually not available in the market. If you are taking your first steps in the Forex market, then you are probably...


Easy ways to avoid scammers in Forex

The Forex market is not a scam. In fact, it is an amazing place to make money. Unfortunately, dirty scammers (which operate not only in the Forex market, but others too) have ruined the reputation...

Trading journal: should you keep one?

There are so many Forex blogs out there. Sometimes I think too many actually. But some of them are pretty useful (like ours, of course) and a common advice I've seen...

How to 'trade the news' in forex?

I am sure you've heard of it. The term 'trade the news' refers to those guys who would rather read newspapers all day instead of sitting behind the charts for hours trying to make sense out of red...

Understanding the US dollar index (USDX)

If you are trading Forex for a month or so, you've probably came across with the term 'US Dollar Index' or 'USDX'. We all know what a dollar is - even kids know it....


4 steps to make your own trading system

There are a few basic ingredients that should always be present in a successful forex trading strategy. We can emphasize on the importance of a systematic approach...