When you’ve learned all the necessary skills to trade forex, the next step is to consider increasing the amount of risk you take per trade. Of course this comes with a larger degree of uncertainty and possible losses on your account, and this could in turn impact your way of thinking and emotions. As a result, you might end up being more nervous and indecisive when you need to make a trade decision.
On the other hand though, taking on more risk by trading bigger positions has more upside potential. If you risked 2% on a trade that you normally risk 0.5% on, you could have the chance to score four times as much as the profits you would’ve made. If you are already making consistent profits and comfortable with the risk that forex trading entails, then you should consider trading larger positions already in order to maximize your winning potential. Here are some factors you should look at.
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.
Next is a gradual approach. You can’t simply go from 1% to 5% risk in a single trading day as this might shock you when your trade turns out to be a loss. Instead, up your risk by increments of say 1% or 0.5% until you get used to trading a larger position size.
Third is using a percentage basis risk instead of a monetary basis for risk. This will help keep things constant when it comes to trading psychology and guarantees that you won’t be thinking much differently when you increase your actual account size. Trading at 1% risk for a $1,000 account would more or less feel the same as risking 1% per trade on a $100,000 account.
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