Forex Position Size Determination

One of the most difficult issues for Forex traders is the process of determining position size. Indecisiveness in this matter generally hinders potential returns or increases loss rates. In fact, the position size also affects the leverage ratios and thus the earnings. Although there are successful lot calculation tools that will come to the rescue of the investor in this regard, the work is somewhat over with the investor. In other words, everything is not just about successful calculations. Here are the points that the investor should pay attention to when determining the position size.

Have Money Management Skills

Money management is a must-have feature in a forex trader’s area of ​​competence. It is not difficult not to harm the existing capital. The important thing is to do them with a certain awareness while taking steps. E.g; The investor must analyze how much risk he may have in his position. One of the most important rules in this regard is not to risk more than 2% – 5% of the amount in the account. For new traders, who are more likely to make mistakes than other traders, this rule is often cited by experts. Remember; Sensitivity in money management will bring long-term success.

Forex Volatility and Position Size Are Proportional 

Price movements in the Forex market can change very rapidly in a short time. This proves that the forex market is a highly volatile market. In fact, this is the most important feature of forex. Currencies, which are affected even by the different situations experienced by the countries (not only economic events, but also social, political and natural disasters are included in this situation.), may animate the charts for a while by showing volatility. Therefore, the volatility of the market is directly proportional to the position size decision. The level of volatility plays an important role in the positioning decision.

In this case, keeping your position close to the minimum will allow you to control the risk. Before you think you will make a small amount of money with small positions; Keep in mind that high volatility combined with high leverage can bring you large gains but also high losses.

Decision Phase

On the basis of all the planning made before the transaction; should be as logical as possible. Remembering that Forex is not a game but an investment tool will prevent emotions from being reflected in transactions. For this, it is useful to think completely rationally and determine the position size. However, it is necessary to determine the appropriate stop levels without ignoring the possibility of error. This level is directly related to your risk taking potential.

SEE ALSO; 8 Surprising Facts in Forex History

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