So you’re part of an elite group of traders that are consistently profitable. Fantastic! It’s time to take your trading up a notch, but how? There are three factors that could be limiting your profitability. The first is improper position sizing. In other words, knowing when to trade big and recognizing when to minimize your risk. The second is being unable to adapt to the current market. Know when to be flexible and how to be reasonable with your expectations. And finally, there’s fear of pulling the trigger, which could prevent you from entering the market at optimal levels.
- Position sizing is a key element of risk management that can spell the difference between catching a big fish and snagging a small fry. It goes beyond knowing how much you stand to lose – you also have to know when to trade big and when to minimize your risk exposure.
- When the market is trading in your direction and you are dealing with a high probability setup with large potential rewards, it may be a good idea to increase your risk. In Blackjack, it’s like betting big when the cards are stacked in your favor.
- On the other hand, if you feel like there’s a lot of uncertainty involved (as in the case with news trades) and the potential return on risk isn’t top-notch, it may be best to reduce your risk and go with a smaller position.
“Just because your account is in the green doesn’t mean you should stop working to be better.”