One of the biggest challenges faced by beginner traders is trying to level up into trading larger positions. This entails larger risk and potentially larger losses, which could have an impact on trading psychology and emotions. In turn, these additional concerns may cloud one's judgment and make it difficult to think clearly while making trade decisions.
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.
The last tip is to focus on risk as a percentage of your account instead of the monetary risk involved. Aside from assuring that you are more focused on the trade details, this also helps you move on to larger account sizes without much psychological adjustments. Constantly thinking of risk as a percentage of your account can help you trade the same on a $1,000 capital to a larger $100,000 capital without being overwhelmed.
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.
The last tip is to focus on risk as a percentage of your account instead of the monetary risk involved. Aside from assuring that you are more focused on the trade details, this also helps you move on to larger account sizes without much psychological adjustments. Constantly thinking of risk as a percentage of your account can help you trade the same on a $1,000 capital to a larger $100,000 capital without being overwhelmed.
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