Forex The importance of managing position sizing in trading

[FXOchartist]

Position sizing is a fundamental factor in trading to manage risk. This concept is used to determine how much capital is allocated in trading.

Proper position sizing can minimize the impact of risk in trading so that in one trading transaction you do not experience a margin call too quickly due to using a position size that is too large.

Determining position sizing is closely related to the leverage used. As is known, leverage is like a double-edged sword. On the one hand, you can increase profits, on the other hand, the risk is higher.

Typically, high leverage allows traders to create higher position sizes than low leverage, but the impact can narrow the margin level that measures account strength.

Things that need to be considered when making position sizing are risk tolerance and market volatility.

How to determine risk tolerance, each trader may have a different method. Some determine based on the risk percentage, and some determine based on the value in dollars.

In determining the stop loss, the trader has previously calculated the risk tolerance in a trading plan and will adjust the position size to adjust the stop loss to the risk tolerance.

For a more comprehensive explanation of position sizing, you can visit the FXOpen blog and find the article with the title Optimal Position Size May Reduce Risks

 

[Ivo Zetticci]

To participate in Forex trading, broker selection is a must. Don’t only look at the facilities provided by a broker rather give priority to regulation factor. Spend some time of your day in practicing because it is congenial for you and thus make the best use of your demo account. FXOpulence provides a free educational program and a demo account to traders.

 

[FXOchartist]

Apart from choosing a regulated broker, of course, trading skills must always be trained to be able to work as a professional trader so that you don't become a victim of the market. Learning position sizing is important to be able to trade with lower risk. Sometimes it's not the broker who is cruel but the forex market itself which is cruel when traders go against the trend.

 

[moonchild]

Position size have sent many forex accounts to their early grave, it is easy to read about it online but when it comes to implementing what you have learnt to the live market, we struggle with it because we are humans and we are full of biases, we get greedy and use sizes we are not suppose to use which in return will almost ruin our account.

Hence we have to use tools and also constantly remind ourselves how important it is to adhere to good position sizing and have patience till our account grow to the extent where we can the sizes we want eventually.

 

[FXOchartist]

Trading especially manually closely related to trading psychology, this depends on each trader, maybe as humans sometimes bias occurs, but by continuing to learn from mistakes, it is possible to get better trading skills.