By undertaking the overnight risk, swing trades are usually done with a smaller position size compared to day trading, which
utilizes larger position sizes usually involving leverage through day trading margin.
When your expectations are more in - line with the reality of trading, you will have less desire to over-trade, and you will feel less desire to
trade large position sizes as well.
Please note that Saxo Bank reserves the right to increase margin requirements
for large position sizes, including client portfolios considered to be of very high risk.
As a result, when swing trading, you often take a smaller position size than if you were day trading, as intraday traders frequently utilise leverage to
take larger position sizes.
Sure, if you have a bigger account you can
trade larger position sizes and potentially make more money, but if you don't know HOW TO TRADE, all the money in the world won't do any good.
Some traders are very active and do many trades a day,
with large position sizes, catching even the small price movements; while there are others who trade only on specific news events or only on tendencies that they have well researched.
In the chart example below, we can see how the trade entry trick can increase the risk reward on a trade by allowing you to get a tighter stop loss and thus trade
a larger position size.
Ceteris paribus,
the larger your position size, the more you stand to lose.
They end up arbitrarily placing their stop loss just so they can trade
a larger position size, this is a mistake born out of greed and will end up killing your trading account in the end.
Whenever possible, I aggressively pyramided into winning positions during trending moves, effectively snowballing the trade's initial position size into
a larger position size which substantially increased the risk reward ratio on each trade.»
We will let our winners run to
larger position sizes, but for portfolio risk management purposes, we limit our exposure to any one holding to 8 % of the portfolio's total value.
As your account grows through proper trading habits, you can trade larger and
larger position sizes to the point of eventually being able to make a lot of money from even one trade per month.
Variance can be caused by a low winrate, coupled with a small reward: risk ratio, disproportionately large losses,
large position sizing and high risk can also attribute to variance.
Just looking at R - Multiple alone often does not tell the whole story and many traders handle trades differently when they use
a larger position size.
The larger your position size, the larger your pip value will be and therefore, the greater the impact on your profit / loss (P / L).