Beginner traders who have already shown consistently profitable performance in trading should begin to consider increasing the position size or amount risked per trade. Bear in mind though that this increases the risk you take, which means that you might be exposed to larger losses and more emotional risks. With that, you could have a harder time concentrating on your actual trade as you could be overwhelmed by the larger amount at risk.
On the other hand though, taking on more risk by trading bigger positions has more upside potential. If you risked 2% on a trade that you normally risk 0.5% on, you could have the chance to score four times as much as the profits you would've made. If you are already making consistent profits and comfortable with the risk that forex trading entails, then you should consider trading larger positions already in order to maximize your winning potential. Here are some factors you should look at.
First is profitability. If your account is in the green, then that's one of the go signals to trading larger positions. If you're in the red, you run the risk of digging a deeper hole by increasing your risk or position size so you might have to work on catching profits first before leveling up. In this case, stick to your usual risk sizes until you are positive, before considering increasing your risk.
The second tip is to go for a gradual increase. Don't just jump from a 0.25% risk per trade to a full-on 2% risk per trade as this might force you to watch the nominal amount instead of concentrating on the percentage risk. Just go for small incremental increases so that you won't find it too sudden and consider increasing by 0.5% at a time.
The last tip is to focus on risk as a percentage of your account instead of the monetary risk involved. Aside from assuring that you are more focused on the trade details, this also helps you move on to larger account sizes without much psychological adjustments. Constantly thinking of risk as a percentage of your account can help you trade the same on a $1,000 capital to a larger $100,000 capital without being overwhelmed.
On the other hand though, taking on more risk by trading bigger positions has more upside potential. If you risked 2% on a trade that you normally risk 0.5% on, you could have the chance to score four times as much as the profits you would've made. If you are already making consistent profits and comfortable with the risk that forex trading entails, then you should consider trading larger positions already in order to maximize your winning potential. Here are some factors you should look at.
First is profitability. If your account is in the green, then that's one of the go signals to trading larger positions. If you're in the red, you run the risk of digging a deeper hole by increasing your risk or position size so you might have to work on catching profits first before leveling up. In this case, stick to your usual risk sizes until you are positive, before considering increasing your risk.
The second tip is to go for a gradual increase. Don't just jump from a 0.25% risk per trade to a full-on 2% risk per trade as this might force you to watch the nominal amount instead of concentrating on the percentage risk. Just go for small incremental increases so that you won't find it too sudden and consider increasing by 0.5% at a time.
The last tip is to focus on risk as a percentage of your account instead of the monetary risk involved. Aside from assuring that you are more focused on the trade details, this also helps you move on to larger account sizes without much psychological adjustments. Constantly thinking of risk as a percentage of your account can help you trade the same on a $1,000 capital to a larger $100,000 capital without being overwhelmed.
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Want to find out more about forex strategies, then visit Jamison Raymundo's site on how to choose the best forex strategies for your needs.
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