Why does Position Sizing Plays An Important Role in Forex Trading ??

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Forex Confidante Articles – Why does Position Sizing Plays An Important Role in Forex Trading ??

When we first get our feet wet into forex trading, we
are very keen to learn all kinds of trading techniques in order
to get us an advantage among other forex traders. And we alway
seem to focus on 1 thing. Our entry point.

When to buy or when to sell; there are an enormous amount of
indicators available for us to choose from, some good, and
some bad. The ones that you place value into are up to you.
I have developed my own through many years of trading and study.
I have gone through the good, the bad and sometimes very ugly
“public indicators” as I call them.

This Forex Confidante article is not in so much about what indicators are good, that discussion would take several days. In this article I wish
to go over a critical point that is much often left out. That point
is that although there is a plethora of indicators to use, and
your main goal is market timing (we all want to hit the highest bid,
and take the lowest offer.) These indicators never teach the
most important component. That component is “How much?”
The “How much” is more important than the timing of the indicator.

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Let me use a fairy tale example. You’re on a beach and
find the proverbial bottle. You open it and a hot genie pops out.
The genie grants you one trading wish (things have gotten
rough for the genies over the years, the days of three wishes
are long gone.) You being a smart trader using Forex Confidante
want to know the Low, High, and Close of the next trading day.
However, in order for you to take advantage of the information you have
to be in position at the open. You agree. (You are not given the open)
So the genie tells you that the high will be 22, the low will be 3,
and the close will be 4. How do you trade the range?

The answer is Position Size. You need to have an amount
on that can sustain the range of the day without stopping
you out, and getting a margin call. We all want it to open
at a low and rally up to the high so we can sell at 22. But
what happens if it opens at the high and falls to the low
then the close. Can you see how even if you know the
range of the day how “size matters?”

How many times have you been short, only to have your
stop loss hit and then the market collapses after that?
How many times have you put a trade on that goes in
your favor and you don t feel like you made enough as
you should have? The answer is not better timing
techniques, the answer is position size.

One of the most important keys to Forex Confidante
success in the markets is;  knowing “how much” and
when to add to a winner, this one technique increases
your over all profitability ten fold.
However, most people think that success is found in
analyzing and following the signals from the “public indicators”
for perfect entry. I got news for you markets do not give up
there profits that easy, and you need to be prepared for non
perfect entry. As a matter of fact, entry should never have to
be perfect; it just has to be entered (executed at the price point)
where you put it.

In summary in order to be successful in the markets, one of
the most important questions you need to know the answer
too is “How much can I risk on this trade?” In order to answer
that you need to know “What are my Goals?” Where does my
stop need to be?” “Where is my take profit?” The answer to
these questions is more important than your golden indicators
lining up. In my next article I will give you a simple method
for figuring out the Size issue. Because size really does matter,
no matter what your girl tells you. It really does.

Want to learn more?

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Forex Confidante is not like most crap trading materials out there. It is original and contains all my trading knowledge and experience so far.
On top of that, as my members you will get all my support. I will answer
all your questions personally and you will get constant education from
my videos, Q&A online seminars. This is a long term relationship I am building with you guys here.

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