Jump to content

Exchange Blog Cryptocurrency Blog


All Pips



The importance of managing position sizing in trading


radex78

Recommended Posts

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.

Ideally, 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.

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
 

Link to comment
Share on other sites

  • 3 weeks later...

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

×
×
  • Create New...