Trading - Risk Management = Gambling

Trading – Risk Management = Gambling

Position Sizing – The Way to Profit in Forex

  • It has been said that the single most important factor in building equity in your trading account is the size of the position you take in your trades. In fact, position sizing will account for the quickest and most magnified returns that a trade can generate. 
  • The forex market, in particular, is a venue where large bets can be placed thanks to the ability to leverage positions and a 24-hour trading system that provides constant liquidity. In fact, leverage is one of the ways to “play for meaningful stakes”. With just a relatively small initial investment, you can control a rather large position in the forex markets; 100:1 leverage being quite common. 

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  • Plus, the market’s liquidity in the major currencies ensures that a position can be entered into or liquidated at cyber speed. This speed of execution makes it essential that investors also know when to exit a trade.
  •  “How much is my risk to reward on any particular trade?” Answering this question properly requires an understanding of your methodology or your system’s “expectancy”. Basically, expectancy is the measure of your system’s reliability and, therefore, the level of confidence that you will have in placing your trades.

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