THE SIZE OF TRADING POSITIONS. NEW LOOK AT THE OLD RULES!
HOW MUCH ARE YOU READY TO LOSE IN ONE OPERATION?
What part of the deposit are you ready to risk? How to calculate the percentage of risk? How to choose the size of trading positions? New look at the old rules of money management. This information will be useful for beginners and interesting for advanced traders. Are you thinking that simple and you know everything? Maybe you were wrong?
What part are you willing to risk in a transaction? Reading recommendations traders you will find 2% -3%. Others recommend 5%. We want to ask – who is it decided? As these numbers have been allocated? For what is the market? We have different point of view!
These guidelines were written when working conditions were significantly others. Also today, many authors simply make a copy of these recommendations without thinking what it means. Today, you can open a flexibly account, enter and withdraw money profit. Why do you keep all the capital in the trading account and risking 2% of it? Correctly following: Keep on trading account the amount needed to trade! Free money is better kept in the bank.
RULE 1. KEEP THE MONEY IN THE BANK. IN TRADING ACCOUNT HOLD THE REQUIRED AMOUNT.
If you are a beginner you in any case lose your deposit. No matter what percentage you risk. And it will be 1 or 5 or even 25%. It depends on how quickly you lose your deposit. The sooner you lose the sooner you start to think about what you went wrong.
The loss of the deposit is another topic. We are considering how to determine the size of the trading account.
First you have to know the likelihood of your trading system. This value can be determined on a demo account and a mini forex better. On this basis determine the size of the trading account to work. But first you must learn to keep the funds in your account. Only then can we build a system. You should to understand that without a system of any size deposit will be lost. Only with a system that has a positive expectation, you can continue working in this direction. The next step you have to learn their statistics and identify the largest series of of failed operations. If you have difficulty with your trading system – recommend not to lose energy, money and time and use our service, MAKE MONEY. It enables you to quickly go to professional work. Beginners can to check the systems are trial service MAKE MONEY.
RULE 2: YOU NEED TO HAVE A TRADING SYSTEM WITH POSITIVE EXPECTATIONS. OTHERWISE, YOUR TRADING ACCOUNT IS NOT NEEDED.
That is axiomatic – this is usually that your system should have positive expectations profitability of your operation. And the higher it is – the faster you can accumulate your capital. Remember, before you start working professionally (earning money) you need to demo or a mini forex derive their own system that will give you a positive expectation of return. If you do not have the system recommend reviewing our services. As a beginner and for those who want to make professional – MAKE MONEY. You want to know why our offer will be useful? We offer a systematic approach to forecasting and trade. Each recommendation has a tested algorithm. So our recommendations are systemic. Doing recommendations and requirements management means you’ll have a positive result.
RULE 3 CONSIDER THE VALUE OF MARGINAL COVER TRADING POSITIONS.
An important point which should draw your attention. Ignoring this can lead to unpleasant and premature closure position your broker.
When you open a position you broker requires a margin coverage. Be sure to reserve margin value coverage. Otherwise you may have trouble in the form of automatic closing your position broker. And usually throwing the closing market starts to go where it should.
What it means: If you trade 0.1 lot EURUSD and your stop is just 70 points, the broker requires 100% coverage – then you are in for this operation to reserve $ 170
RULE4. ANALYZE TOOLS TO TRADE.
Separately allocate the situation when you trade two pairs which include one and the same currency. For example EURUSD and USDCAD. Both pairs present USD. Two of your operations combined in one currency USD. So you can not consider these two pairs of as an independent operation. If you select one operation to risk $ 100. And by trading two pairs I recommend to reduce the share of the $ 200 to $ 150 and even $ 130 for 2 operations.
Determine the share which you should risk having their system and knowing the statistics system. For example you have the largest series of failures 4 operations. Then calculate the amount of deposit required at least 5 deals.
Assume you are ready to allocate for operation $ 1,000.
Then one operation you accounted the fate of $ 200.
In this amount you turn marginal coverage. What does it mean? Broker requires 100% coverage. Stop is 50 points.
You trade EURUSD.
One point = $ 1
The proportion of one operation 200.
The size of the position in this case:
Size position = Total amount per transaction / (number of points to stop + broker margin requirement cover)
Size position =200 / (50 + 100) = 0.13 lot.
As for the simultaneous opening position we recommend the size of the second reserve position assuming the failure of the first.
That is the size of the first: $1000/5 = $200
The size of the second count:
$1000-$200 = $800
$800/5 = $160
RULE5. TRADING ACCOUNT SIZE DEPENDS ON THE SIZE OF TRADING POSITIONS. THE SIZE OF TRADING POSITIONS DEPENDING ON THE SIZE OF THE TRADING ACCOUNT AND OTHER FACTORS.
This is the amount that you risk a second operation. Also recommend separate operations over time. Do not attempt to open all five operations in one day. If the operation can not be opened at the same time you can trade in equal parts. This issue is money management. Reducing the share you reduce the profitability of the system. But increases the survival of your deposit. So you must have the following algorithm:
Build (buy, develop) their own trading system.
Determine the largest series of failures (statistics).
Based on the amount of capital you are willing to transfer to the trading account determine the amount per one operation. Or vice versa specify how many you need on the trading account to achieve your goals.
Probably explains you will be a little difficult. But the position size must be a mandatory element of your trading system. Do not risk unnecessary. Do not risk working without a system. Forex is not a casino. This is business. And to make a profit should be clearly understood that and what to do here.
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