For all traders, it is important to position size as per time and know when to scale and descale. While winning trades traders have to scale up and similarly while losing traders should reduce positions size.
All good traders follow this rule. Why continue to lose on five lots (contracts) per trade when you could save yourself a lot of money by lowering your trade size down to a one lot on your next trade? If I have two losing trades in a row, I always lower my trade size down to a one lot. If my next two trades are profitable, then I move my trade size back up to my original lot size.
It’s like a batter in cricket who has missed the two deliveries and have not scored out of it. The next time up he will take a single by trying to make contact and giving strike to non-striker who is connecting well to have a swing at it particularly in T20 matches. Trading is the same: lower your trade size, try to make a tick or two — or even scratch the trade — and then raise your trade size after two consecutive winning trades.
Thus, above is a simple formula to size positions based on your capital adequacy and per trade how many lots one needs to trade as well risk per lot is clearly calculated.
Therefore moral of the story is to scale the winners and cut while losing.
Recent Comments