He never kept the money he made simply because he traded too
big of a position size for his account all the time.
When I add to my stock positions, I will only add 10 %
of my position size on any consolidation or even pull back to the 50 Day moving average.
And in many cases they're probably right — especially if you're not properly diversified, you're not
mindful of your position sizing, and you're heavily dependent on the income from this account.
I am unsure on a
part of position sizing: I know I'm meant to only risk around 2 - 3 % of my total capital on any one trade, what happens if I have a string of winners or losers?
Proper usage
of position sizing not only means you will have more winning trades, but it also means you will trade more objectively, because you are placing your stop loss at logical points above or below support or resistance levels, instead of randomly placing it a set amount of pips away from entry.
There are times they will benefit less or even lose more when risking a fixed dollar amount per trade due to
lack of position sizing.
Through all my testing, trying different
types of position sizing has rarely had much change in the results and definitely not enough on the positive side to justify the additional complexity.
A thorough
understanding of position sizing is very important to your overall money management plan and to correct implementation of risk reward on every single trade.
Think about it, one trader trades 30 times a month and the other trades 3 times a month, obviously the guy trading 30 times a month can't trade as big
of a position size per trade as the guy trading 3 times per month.
Pips are basically irrelevant because one trader could risk the same amount of pips as another trader but they could have drastically different dollar amounts at risk, this is a
result of position sizing and will be discussed below.
Give yourself the best shot at becoming a consistently profitable forex trader by combining a great method like price action with the
power of position sizing and risk to reward scenarios.
Diversification rules are a
part of position sizing and will set boundaries and provide the framework for a risk management plan.
If you prefer not to use MetaTrader, you can still use the web version
of the position size calculator.
In addition to an entirely new user interface, the latest version
of this position sizing indicator includes:
Give yourself the best shot at becoming a consistently profitable forex trader by combining a great method like price action with the power
of position sizing and risk to reward scenarios.
To be mindful
of position sizing, except in rare cases, the value of this trade wouldn't exceed 5 % of my total portfolio value.
To be mindful
of position sizing, except in rare cases, the value of this trade wouldn't exceed 5 % of our total portfolio value.