Learning the art of position sizing is crucial to your trading success. If you want to know how to set your position size correctly in Forex, you should read this article. In this article, we are going to tell you how to set the size of your position so that you are not taking unnecessary risks into your account. Every trader takes risks in Forex, but these risks should be affordable. If you set your position size correctly, you will be able to make a consistent profit.
Before we dig deep, we would like to give some useful information which will help you to establish your trading career in an organized way. Many retail traders often look for the low end brokerage firm to trade with low cost. But if you look at the successful traders in the United Kingdom you will be surprised to see that all of them are trading with a high class broker like ETX Capital. Being a full-time trader, it’s imperative to have access to the premium trading environment. If you are not sure about a new brokerage firm, open a spread betting demo account and assess the quality of their service. If you feel satisfied, start trading with real money.
Take help from risks to reward ratio
One of the biggest mistakes that every trader makes is that they make their position size too big. You should not do that in Forex. When you are trading for money, you should know how to take the minimum risks for the maximum amount of profit. Your risks to reward ratio can help you to set your position size. It is a ratio that tells you how much risk you should take for making the most profit. For example, it will tell you to take risk of £10 for making a profit of £60. If you do not trade with a high-risk reward ratio, you should do it right now. It is very helpful to set the correct position size for your account.
Losing trades are inevitable in spread betting. You might learn the art of trading by using the spread betting demo account yet you will have to face losing trades. Even the most elite class traders in the United Kingdom often have losing months. But they are very much concerned about their investment and risk-reward ratio. So at the end of the year, they remain profitable.
It should not be too big
Even if you have not heard about the risk-reward ratio, you should use your sense and not take a big risk. Taking a big position size can wipe your account balance in one trade. If you want to trade like a big trader, you can use leverage in your trades. Do not take a bigger position size which does not match your account. Even professional traders take a small position size for their trades. They know how risky it is when they are taking big position sizes in Forex.
Use your strategy to set position size
Your strategy plays an important role in your career. You should not ignore your strategy based on your emotions. Try to use it as much as you can in your career. If you are using a short-term strategy, your position size will be different from a long-term strategy. Your position size should change your strategy and it is a good thing. If you think you are trading with big position size, match it with your strategy to find out if you are wrong. Trading with the right position size can give you lost money in Forex with taking not many risks. The majority of the retail traders are losing money since they are trading with money which they can’t afford to lose. But to become a profitable trader you need to trade without any emotional stress. Make sure you can afford to lose your account balance at any moment.