an hour ago
williams🔵 ( @williams_dickson86 )
One of the most basic yet critical parts of becoming a consistently profitable trader is knowing how to size your positions correctly.
Trading is a game of probability. It follows the law of large numbers. So if you want to be around for the long run, you must be disciplined with your capital.
For example: Grab a quarter. A quarter has 2 sides so the probability of it being heads is 50%. But if you were to flip the quarter 4 times, and 3 out of the 4 times it came heads, that would give you a 25% win % even though you have a 50% probability of being correct. Now if you flip it 10 times, your % might go up a bit closer to the 50% probability and so forth. The more you flip the coin, the closer you will be to the exact 50% probability of the quarter landing on heads. Try it for yourself!
So let’s get into these %’s.
Recommended capital per trade:
This is the recommended range to trade in about 90% of the time. The majority of your trades should never go beyond this risk amount. If you’re risking more than 3% per capital, a few losses can really impact your overall capital. ESPECIALLY if you have a small account! Small accounts blow up quickly if you’re not sizing your positions properly!
This range is suitable as well but should only be used in 10% of your trades. This can be used in trades that have higher chances of success. Small accounts should stay out of this area. Taking a 5% loss on a trade in a small account hurts a lot more than a 5% loss on a bigger account.
Remember that when setting up your trading plan and setting up your entry/stop loss, you make sure the you calculate your positions properly so that any losing trades only lose between the 1%-5% range as described here.
If you’re not sure how to calculate your position sizes, check out our YouTube channel, we have a video on that! Links in bio!
INBOX TO GET STARTED
#bitcoin #bitcoinprice #cryptocurrency #bitcoins #bittrex #money