Autumn Hello, friends! You know, what is the maximum allowed size of the position and how to define and calculate! This article will be extremely useful to you!
The article will be difficult, but do not read it, you will not earn! I think you can afford to find out! This information must learn every trader!
To understand these questions, it is necessary to know what the risk in a transaction, we are going to do today!
Everyone knows that most people lose money in the markets, and only 5% of their earning. Has anyone thought about the reasons for these results? (General who ever thought?) Is Hardly! How much you want to earn in the market? 300-400% per year? This is a very inflated figures, respectively, the risks and volume of items too! Most traders lose money just because of that! Open your eyes, look at the situation adequately. Forget for a moment how much you want to earn, how much it will be in dollars or percentages, throw this stuff out of your head and think about your position size, about what you risk! At one of the sites of the popular DC has recommended to not risk more than 30% of your capital. It's a madhouse! Just imagine what will happen to your money if you happen to a losing trade? You lose time for 30% of your money! What if two transactions in a row? Or three losing trades in a row? Yes, you have nothing left! You do not have anything to sell! Even socks that will not buy! Do you think you will never be three losing trades in a row? You are wrong! Nobody even not lift a finger, that would verify the probability of such an event. Especially strong this confusion is present in FX, because of the large availability of trading currencies. By the way, for those who are not familiar with forex trading, you can see my article "What is Forex?". Read the following calculations, do not be lazy, understand them! You risk your money!
Suppose the system has a 80% winning trades and 20% of unprofitable. The probability of failure in the transaction = 0.2 (this means that 2 out of 10 transactions run loss). The probability of two consecutive losing trades = 0.2 * 0.2 = 0.04 (this means that for an average of 100 transactions will be 4 Series 2 losing trades in a row!). You need only 25 transactions to get a drawdown of 60%! And these risks are advised to DC! And why not, if no one even wants to check ?! All you need to 400% in a year (at least!). Probability 3 consecutive transactions with a loss of 0.008 (which means that there will be 8 series of three unprofitable transaction committed for 1000). You need 125 transactions, which have lost 90%! Maybe it is boring written, but take the trouble to read!
That's why the majority is left without money.
All earning traders who can confirm their results, it is advised not to exceed 5% of the risk. In trend trading 2%, as many losing trades.
In general, what I mean by 5% of the risk? Many do not understand what is the risk in the transaction!
Risk - that's what you risk.
Dear readers, the risk of 5% means that in the case of loss-making transaction expense will decrease by 5%. Not to be confused with the size of the position! Some fruits (pineapple, apricot, apple) measuring risk in pips, points! As before you can think of! ??? It is possible to measure the risk in dollars, percentages, but points and pips nothing to risk have not! Remember though, that the cost of the item in each currency pair is different, not to mention the futures or stocks. Measure the risk as a percentage of the bill, it is the most convenient way in my opinion.
Novice traders often work without stops, and risk their zhiznyuvsem its capital. No need to once again say that this tactic trade sooner or later will lead to loss of money. You can not always be right, and to make every transaction, there will always be white and black stripes in the trade. If you can not control the size of the position and risk everything, then wait a black band you do not get!
Now you know what a risk! And we have reached the most important thing!
The position size should be determined on the basis of risk!
We must clearly know where you close the position if the price goes against you. More is better to put a stop order. We must also clearly know how much you will lose if the order will be executed! Yes, dear traders, each transaction would have to use a calculator or find a script that will do it for you (that way I have done). It does not apply to methods of trade where the stop is fixed size (eg, 20 pm) and the trade is carried out with one tool. You can find a time and do not come back to this issue. In other cases, you will have to calculate the cost of the item, the number of points to stop, count the money that you are willing to lose, and based on these data to determine the number of lots for the transaction. It is very easy to do, but when you learn to do it all the time, you'll have a great advantage over other traders! I know it is on its own.
As in any other business requires a systematic approach. As a whole (creation of trading systems (to help those who did not create it is necessary to read the article "6 technical analysis methods that I have tried," you lighten your way again!)), And the size of the position calculation. We can not allow what would be in the same transaction, you lose $ 5, and the other $ 10, and the third head. We need to do so that would be in each losing trade, you lose the same amount. With this approach to calculate and test trading strategy much easier. And the results are adequate. But most do just the opposite! After the release of important news, shaking hands (as it is necessary to act immediately, not to lose the ticket to a happy life!), Frantically pressing the keys, not examining the figures, the future super-trader opens a position! First opens and then watching how many he bought or sold. Do not ever do that! Otherwise, your money will be in the other!
I will be very happy if the readers will read this article more than once. This information is not easy to learn, but it must be done !!! It must make every trader who wants to earn!
That's it, time to finish the article and go to the gym, and then sat up. I wish you correctly determine the size of the position and always know what you risk!
To understand these questions, it is necessary to know what the risk in a transaction, we are going to do today!
Everyone knows that most people lose money in the markets, and only 5% of their earning. Has anyone thought about the reasons for these results? (General who ever thought?) Is Hardly! How much you want to earn in the market? 300-400% per year? This is a very inflated figures, respectively, the risks and volume of items too! Most traders lose money just because of that! Open your eyes, look at the situation adequately. Forget for a moment how much you want to earn, how much it will be in dollars or percentages, throw this stuff out of your head and think about your position size, about what you risk! At one of the sites of the popular DC has recommended to not risk more than 30% of your capital. It's a madhouse! Just imagine what will happen to your money if you happen to a losing trade? You lose time for 30% of your money! What if two transactions in a row? Or three losing trades in a row? Yes, you have nothing left! You do not have anything to sell! Even socks that will not buy! Do you think you will never be three losing trades in a row? You are wrong! Nobody even not lift a finger, that would verify the probability of such an event. Especially strong this confusion is present in FX, because of the large availability of trading currencies. By the way, for those who are not familiar with forex trading, you can see my article "What is Forex?". Read the following calculations, do not be lazy, understand them! You risk your money!
Suppose the system has a 80% winning trades and 20% of unprofitable. The probability of failure in the transaction = 0.2 (this means that 2 out of 10 transactions run loss). The probability of two consecutive losing trades = 0.2 * 0.2 = 0.04 (this means that for an average of 100 transactions will be 4 Series 2 losing trades in a row!). You need only 25 transactions to get a drawdown of 60%! And these risks are advised to DC! And why not, if no one even wants to check ?! All you need to 400% in a year (at least!). Probability 3 consecutive transactions with a loss of 0.008 (which means that there will be 8 series of three unprofitable transaction committed for 1000). You need 125 transactions, which have lost 90%! Maybe it is boring written, but take the trouble to read!
That's why the majority is left without money.
All earning traders who can confirm their results, it is advised not to exceed 5% of the risk. In trend trading 2%, as many losing trades.
In general, what I mean by 5% of the risk? Many do not understand what is the risk in the transaction!
Risk - that's what you risk.
Dear readers, the risk of 5% means that in the case of loss-making transaction expense will decrease by 5%. Not to be confused with the size of the position! Some fruits (pineapple, apricot, apple) measuring risk in pips, points! As before you can think of! ??? It is possible to measure the risk in dollars, percentages, but points and pips nothing to risk have not! Remember though, that the cost of the item in each currency pair is different, not to mention the futures or stocks. Measure the risk as a percentage of the bill, it is the most convenient way in my opinion.
Novice traders often work without stops, and risk their zhiznyuvsem its capital. No need to once again say that this tactic trade sooner or later will lead to loss of money. You can not always be right, and to make every transaction, there will always be white and black stripes in the trade. If you can not control the size of the position and risk everything, then wait a black band you do not get!
Now you know what a risk! And we have reached the most important thing!
The position size should be determined on the basis of risk!
We must clearly know where you close the position if the price goes against you. More is better to put a stop order. We must also clearly know how much you will lose if the order will be executed! Yes, dear traders, each transaction would have to use a calculator or find a script that will do it for you (that way I have done). It does not apply to methods of trade where the stop is fixed size (eg, 20 pm) and the trade is carried out with one tool. You can find a time and do not come back to this issue. In other cases, you will have to calculate the cost of the item, the number of points to stop, count the money that you are willing to lose, and based on these data to determine the number of lots for the transaction. It is very easy to do, but when you learn to do it all the time, you'll have a great advantage over other traders! I know it is on its own.
As in any other business requires a systematic approach. As a whole (creation of trading systems (to help those who did not create it is necessary to read the article "6 technical analysis methods that I have tried," you lighten your way again!)), And the size of the position calculation. We can not allow what would be in the same transaction, you lose $ 5, and the other $ 10, and the third head. We need to do so that would be in each losing trade, you lose the same amount. With this approach to calculate and test trading strategy much easier. And the results are adequate. But most do just the opposite! After the release of important news, shaking hands (as it is necessary to act immediately, not to lose the ticket to a happy life!), Frantically pressing the keys, not examining the figures, the future super-trader opens a position! First opens and then watching how many he bought or sold. Do not ever do that! Otherwise, your money will be in the other!
I will be very happy if the readers will read this article more than once. This information is not easy to learn, but it must be done !!! It must make every trader who wants to earn!
That's it, time to finish the article and go to the gym, and then sat up. I wish you correctly determine the size of the position and always know what you risk!
