When you've learned all the necessary skills to trade forex, the next step is to consider increasing the amount of risk you take per trade. Of course this comes with a larger degree of uncertainty and possible losses on your account, and this could in turn impact your way of thinking and emotions. As a result, you might end up being more nervous and indecisive when you need to make a trade decision.
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 planning a gradual increase. Jumping from a normal risk of 0.5% to a 5% risk per trade can be overwhelming since you'd actually be risking ten times as much as you used to. Looking at this in nominal terms could be even more shocking so consider upping your risk in increments of 1% or 0.5% so that it's not too sudden.
Last is focusing on the percentage risk than the monetary amount. To keep things constant, you should determine your risk as a percentage of your trading amount rather than determining a fixed monetary amount to risk. This way, even if you increase your base or trading capital, you will remain comfortable with the level of risk even if you're actually risking ten times more than the usual nominal amount.
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 planning a gradual increase. Jumping from a normal risk of 0.5% to a 5% risk per trade can be overwhelming since you'd actually be risking ten times as much as you used to. Looking at this in nominal terms could be even more shocking so consider upping your risk in increments of 1% or 0.5% so that it's not too sudden.
Last is focusing on the percentage risk than the monetary amount. To keep things constant, you should determine your risk as a percentage of your trading amount rather than determining a fixed monetary amount to risk. This way, even if you increase your base or trading capital, you will remain comfortable with the level of risk even if you're actually risking ten times more than the usual nominal amount.