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My approach on Position Sizing

Looking for a way to boost profits? Try a different position sizing approach to see a smoother growth in your forex trading.

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My approach on Position Sizing

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  1. MY APPROACH ON POSITION SIZING Reference: https://www.platinumtradingacademy.com/

  2. Index • My Approach On Position Sizing • Risk Vs Position Sizing • Flash Trades • Radar Trades • Fundamental Trades • Other Data

  3. My Approach On Position Sizing • Over the past week, I was asked a few questions about my trading thoughts and my position regarding the sizing of the trades that I place with the PREMIUM SERVICE. • I promised that I would address this matter via this week’s blog so below I supply my general thoughts on how I approach position sizing.

  4. 1. I have three types of trade: 1. FLASH 2. RADAR 3. FUNDAMENTAL. 2. There are three sizes of lots available: MICRO, MINI and STANDARD.  3. There are a few types of currency pairs in my eyes: • USD major – EUR/USD, GBP/USD, USD/JPY and USD/CHF.

  5. Major commodity pairs – AUD/USD, NZD/USD and USD/CAD. • Minor commodity pairs – USD/NOK and USD/MXN • Cross-Rates – EUR/GBP, EUR/JPY, GBP/CHF, AUD/CHF, NZD/CHF and AUD/NZD. • Commodity cross-rates – EUR/AUD, GBP/AUD, EUR/NZD, GBP/NZD, EUR/CAD and GBP/CAD. • JPY pairs – AUD/JPY, CAD/JPY, CHF/JPY, GBP/JPY and NZD/JPY.

  6. Others USD/SEK, AUD/CAD, SEK/JPY, EUR/SEK, and EUR/NOK Obviously there are hundreds of currency pairs but those listed are the ones that interest me and form the basis of my Forex trading broker accounts.

  7. I approach each category listed above by RISK MANAGEMENT and RISK TOLERANCE. • This is based upon the broker account used. • Inside the EDUCATION tab of the PREMIUM SERVICE there are a couple of articles about why I trade with multiple brokers, these articles should also be read to get a wider understanding of my approach.

  8. Risk Vs Position Sizing • The maximum that I will risk is about 3% of my broker account balance in total for all active live trades. • Many of you have already stated that you see this as too low. • From my perspective it is the only way to give you longevity in trading.

  9. The Forex market takes no prisoners, if you are not boxing clever you will get wiped out eventually unless you trade with disciplines. • This is an overview, a macro level view, of my approach to position sizing.

  10. Flash Trades • USD MAJORS & MAJOR COMMODITY PAIRS – usually MINI or STANDARD LOT TRADES, but never close to the 3% limit to allow me flexibility to add or reduce the position size/exposure.

  11. FLASH TRADES would in 99% of cases not be done on other categories of currency pairs unless after a news breaking data release. • These trades would be MICRO or MINI lot trades, maximum of 0.5% RISK per trade. • These are small trades most of the time.

  12. Radar Trades • All currency pairs are entertained and risks are limited. • I will risk maybe 0.5%-0.75% if pushed (my TRADING PLAN says 1% but this is for extreme circumstances) on USD majors, JPY pairs, Major Commodity Pairs and between 0.4% - 0.5% on the rest.

  13. A mixture of MINI, MICRO and STANDARD lots are used. • Do not be surprised when I tell you that for some of the more exotic pairs my trade size to get me started can be just 4/5 MICRO LOTS.

  14. Fundamental Trades • These types of trades are usually reserved for the commodity crosses. • I have had real identity issues with this category in 2014. • These trades are all limited to just one of my brokers.

  15. Other Data • As a general rule: STANDARD LOTS are only used for USD related currency pairs plus the EUR/GBP and EUR/JPY. • So to recap, even though I have my 0.5% limit on a trade I DO NOT max out on a position / trade size every time.

  16. I will add to trades and reduce trade sizes before Fibonacci levels, pivot points or simple previously noted heavily used horizontal supports. • With JPY pairs when I used to trade them quite frequently, round numbers would do either at 50 or 100 levels. • For the exotic pairs I tend not to add or reduce sizing too much, most of my playing with sizing is due to risk.

  17. STANDARD LOT trading attracts more risk than MICRO LOT trading, hence the reason I am always looking to add to or reduce my RISK EXPOSURE. • Conversely, that's why I also tend to let MICRO lots either work or not work out.

  18. When entering a trade where I want to have say a STANDARD LOT size, I may just start with 2-5 x MINI lots and add as the trade takes momentum in the direction that I want. • This allows me to have an initial wider stop in place that I can tighten later as I add to the trade size.

  19. It is not rocket science but it does take practice. • Knowing the maximum risk per trade per broker account is the first thing and from then on it’s plain sailing.

  20. Let me reiterate, its all about RISK MANAGEMENT. • You can be speculative to a point, but at the end of the day longevity in trading emanates from being savvy and limiting RISK EXPOSURE along with chart analysis and identifying chart high probability patterns.

  21. Thank You

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