Every good trading plan should consider the important aspects of this one . Many traders are rapidly forgetting what is sometimes endanger their own account . Many traders who do not achieve the objectives of trade because their size is too large to trade their account equity which led to a reluctance to release loss of trade .
In this article will discuss a simple way to determine the ideal size of the transaction for your account .
It needs to be underlined , when the size of the trade that you plug out of control and too big , then all the analysis that you wear will not do any good. Why is that ? Of course sometimes the analysis is not running today , although it is a long bearish trend or remain a bullish long process requires , this process occurs consolidation phase . Where circumstances are unpredictable , or at the market sideways . The risks will outweigh the benefits . Therefore , the formula for managing risk is an absolute requirement for your trading career .
This article will give a visualization of the risks that exist on the size of the trade is based on the book by Mark Douglas , entitled " Trading in the Zone " . So you can imagine will cross a chasm as large as the Grand Canyon . To make it easier to understand how important the size of trade transactions in the market , it is necessary an analogy trade size used by the Douglas .
Suppose that the number of lots to be traded is the width of the bridge that you will cross . If the width of the bridge you will use to cross the chasm as wide as 10 toll roads built with proper construction , then you will not be afraid to cross the abyss that is not ? In addition , concerns for the fall will be smaller than if the bridge is fragile and frail . Thus , the larger the size of the trade that you can open in your account , the less likely that you will face losses .
Now you use optimally leverage existing , are likened to leverage a strong grip on the rope bridge . By doing so , however, fluctuations in the market price , if you have a strong grip , you do not need to worry " thrown " into the abyss of loss .
Here are two fundamental aspects that you need to specify before establishing a proper trade size :
1 . What percentage of risk that you are able to accept the loss
2 . In how many pips you will make a stop
Risks You Ready to Accept
In this article will discuss a simple way to determine the ideal size of the transaction for your account .
It needs to be underlined , when the size of the trade that you plug out of control and too big , then all the analysis that you wear will not do any good. Why is that ? Of course sometimes the analysis is not running today , although it is a long bearish trend or remain a bullish long process requires , this process occurs consolidation phase . Where circumstances are unpredictable , or at the market sideways . The risks will outweigh the benefits . Therefore , the formula for managing risk is an absolute requirement for your trading career .
This article will give a visualization of the risks that exist on the size of the trade is based on the book by Mark Douglas , entitled " Trading in the Zone " . So you can imagine will cross a chasm as large as the Grand Canyon . To make it easier to understand how important the size of trade transactions in the market , it is necessary an analogy trade size used by the Douglas .
Suppose that the number of lots to be traded is the width of the bridge that you will cross . If the width of the bridge you will use to cross the chasm as wide as 10 toll roads built with proper construction , then you will not be afraid to cross the abyss that is not ? In addition , concerns for the fall will be smaller than if the bridge is fragile and frail . Thus , the larger the size of the trade that you can open in your account , the less likely that you will face losses .
Now you use optimally leverage existing , are likened to leverage a strong grip on the rope bridge . By doing so , however, fluctuations in the market price , if you have a strong grip , you do not need to worry " thrown " into the abyss of loss .
Here are two fundamental aspects that you need to specify before establishing a proper trade size :
1 . What percentage of risk that you are able to accept the loss
2 . In how many pips you will make a stop
Risks You Ready to Accept
It's not about what the market will do to your account , everything that will happen in the market will have an impact on every transaction you and other traders . Do not think about what the market will do , but ordain risk you are willing to receive treatment as a result of the market . Money Management is the bridge of your system helper who will guide you to get out of the trade through the " right way" .
Smart traders will always make a trade journal , the journal is to always update their account equity and how much risk can be taken into account in a single trade . With a capital of $ 10,000 and has a limit of 2 % max risk , meaning you will only lose a maximum of $ 200 on a trade when the market touches your stop loss . It will also reduce the level of stress in yourself as a trader if at any time the price against the analysis .
Establish at least 2 % of risk limits for each of your accounts . By placing a limit losses then this will prevent you to make transactions that are too big based on how well your trading plan . Smart trader will never ignore risk management . And make sure the transaction quantities be the best way to survive in the market .
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