Hey traders it’s Monday again. A new fresh week of trading and i know as always most traders wonder how are they going to finish the week. Profitable or In a loss? But Monday is a good day to reflect how are you going to protect yourself from the markets avoid getting unnecessary draw downs. So today i came up with a very interesting topic about Position Sizing.
But before we proceed If you where looking for the best broker that has been holding my back ever since Then Tickmill is the one. He offers nice low spreads almost to 0, the best customer support in the industry available 24 hrs 7 days a week. START TRADING NOW WITH THE FIRST CLASS BROKER
When people email me all over the world with the same topic over and over i start picking up some patterns about the particular topic and how traders have been maybe misinformed or misinterpreting the particular topic. Position size emails have been flooding our support mailbox for over 2 years and i have been avoiding this due to a lot of reasons one being many people don’t even understand how useful a position size calculator can be in risk management. So we had to find a POSITION SIZE CALCULATOR first before we respond to these problems and hopefully assist traders in their journey.
Did you know that using a wrong position size will lead to poor performance of your trading?
Most trader’s listen very carefully and they even promise you “Brother i am going to do what you say” but fast forward 2 months, They have lost all of their initial investment. This is how it starts. A trader finds his/her earned $100’s and deposits to his/her trading account. On the first 2 – 3 weeks a trader is making few profits and few losses but the capital may be around $95 to $120. I don’t know what really happens around after the first 2-3 weeks. The trader becomes like a headless chicken panicking all over the place, he/she starts increasing the position size. Now the theme here has changed from trading to gambling, the trader looses everything on the 4th week and has to go use his own hard earned money to fund his/her trading account only to repeat the same cycle day after day, month after month, year after year. This does not have to be you.
The reason why we professionals strictly risk 0.5-2% is not because of slippage. What about psychology? We all know how trading works i don’t want to find myself in a situation where i can’t even bounce back. If i am risking 10% per position it takes 3 losses in a raw to be below the max draw down in my whole portfolio. In most cases i have already failed and if i proceed doing trading activities i am probably going to lose it all. When psycho kicks in you can never escape the torture so its better not to activate it from the first place by using risk management and using appropriate position sizes.
When 2 setups appear on the same time and you have to take them all, then divide you risk appetite into 2. For example if you usually risk 1% per trade then divide it into 1/2 on each position so instead taking 2 full size hits when things go astray then it will just be 1 percent gone.
Now most people will ask what if my capital is so small to accommodate the 1%?
If you have anything below $100 at least, then i can not help you. The less capital you have the more you are going to risk more that’s why many traders can’t make it because the can afford $100 and they take massive risks and the account can’t handle and then they go broke.
We have A position size calculator that will assist you in the course of your trading. Before executing a trade then you must always calculate your position size inline with the stop loss. With out stop loss pips you will never be able to do so. I have also included a video on how to use it below.
I hope i have enlighten you is one way or the other feel free to drop a comment below for any questions and clarifications. Subscribe to this website and never miss any lesson, Opportunity, Setup or signals.
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Lastly don’t forget to sign up for best broker that has been holding my back ever since. Tickmill is the top of the best. He offers nice low spreads almost to 0, the best customer support in the industry available 24 hrs 7 days a week. START TRADING NOW WITH THE FIRST CLASS BROKER