One of the biggest challenges faced by beginner traders is trying to level up into trading larger positions. This entails larger risk and potentially larger losses, which could have an impact on trading psychology and emotions. In turn, these additional concerns may cloud one's judgment and make it difficult to think clearly while making trade decisions.
While this may be true, you also have to consider that a larger position size also opens up a larger profit potential on your trade. Going from 0.5% risk to 1.5% risk per trade can triple your possible profits, assuming that you win your trade. What you should remind yourself about is that your consistent profit record and expectancy should remain the same regardless of the size of your trade position. Here are some tips that could help.
The first tip is to look at your profit and loss statement. If you are able to see consistent profits and good expectancy figures then it's about time for you to consider increasing your position size and pressing your advantage. On the other hand, if your account is in the red and you don't exactly have the best expectancy numbers, you might be worsening the damage on your account if your risk more. If that's the case, stick to your usual position size per trade and move on to larger positions if you are already raking in consistent profits.
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.
While this may be true, you also have to consider that a larger position size also opens up a larger profit potential on your trade. Going from 0.5% risk to 1.5% risk per trade can triple your possible profits, assuming that you win your trade. What you should remind yourself about is that your consistent profit record and expectancy should remain the same regardless of the size of your trade position. Here are some tips that could help.
The first tip is to look at your profit and loss statement. If you are able to see consistent profits and good expectancy figures then it's about time for you to consider increasing your position size and pressing your advantage. On the other hand, if your account is in the red and you don't exactly have the best expectancy numbers, you might be worsening the damage on your account if your risk more. If that's the case, stick to your usual position size per trade and move on to larger positions if you are already raking in consistent profits.
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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