Are You Ready To Trade Larger Positions?
One of the biggest challenges faced by beginner traders is trying to level up into trading larger positions. This entails larger risk and potentially larger losses, which could have an impact on trading psychology and emotions. In turn, these additional concerns may cloud one's judgment and make it difficult to think clearly while making trade decisions.
On the other hand though, taking on more risk by trading bigger positions has more upside potential. If you risked 2% on a trade that you normally risk 0.5% on, you could have the chance to score four times as much as the profits you would've made. If you are already making consistent profits and comfortable with the risk that forex trading entails, then you should consider trading larger positions already in order to maximize your winning potential. Here are some factors you should look at.
One is your profit record. It is easier to take the next step and level up to a larger position size per trade if your account is already in the green and you have a good expectancy. If your account is below break-even, you might not be on your best trading mindset as you know that risking more could end up leaving you with a larger dent on your account. For the latter, just stick to your normal position size then considering leveling up when you start making consistent profits.
Next is planning a gradual increase. Jumping from a normal risk of 0.5% to a 5% risk per trade can be overwhelming since you'd actually be risking ten times as much as you used to. Looking at this in nominal terms could be even more shocking so consider upping your risk in increments of 1% or 0.5% so that it's not too sudden.
Third is using a percentage basis risk instead of a monetary basis for risk. This will help keep things constant when it comes to trading psychology and guarantees that you won't be thinking much differently when you increase your actual account size. Trading at 1% risk for a $1,000 account would more or less feel the same as risking 1% per trade on a $100,000 account.
On the other hand though, taking on more risk by trading bigger positions has more upside potential. If you risked 2% on a trade that you normally risk 0.5% on, you could have the chance to score four times as much as the profits you would've made. If you are already making consistent profits and comfortable with the risk that forex trading entails, then you should consider trading larger positions already in order to maximize your winning potential. Here are some factors you should look at.
One is your profit record. It is easier to take the next step and level up to a larger position size per trade if your account is already in the green and you have a good expectancy. If your account is below break-even, you might not be on your best trading mindset as you know that risking more could end up leaving you with a larger dent on your account. For the latter, just stick to your normal position size then considering leveling up when you start making consistent profits.
Next is planning a gradual increase. Jumping from a normal risk of 0.5% to a 5% risk per trade can be overwhelming since you'd actually be risking ten times as much as you used to. Looking at this in nominal terms could be even more shocking so consider upping your risk in increments of 1% or 0.5% so that it's not too sudden.
Third is using a percentage basis risk instead of a monetary basis for risk. This will help keep things constant when it comes to trading psychology and guarantees that you won't be thinking much differently when you increase your actual account size. Trading at 1% risk for a $1,000 account would more or less feel the same as risking 1% per trade on a $100,000 account.
About the Author:
Want to find out more about forex strategies, then visit Jamison Raymundo's site on how to choose the best forex strategies for your needs.
posted by Vittoria @ November 24, 2013
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home