[How to] easy position sizing on BitMEX ? (Very important)
It’s an essential element of success for every trader. Because traders frequently take a random position size. This may look like them deciding to take a larger position if they feel really confident about a trade, or, alternatively, opting to take a smaller position if they feel a little less confident. However, this may not be the most informed or strategic methodology for determining the size.
Similarly, a trader should not just elect a pre-determined position size for all trades, regardless of how the trade sets up; this style of trading will likely lead to underperformance in the long run. So, if it's not in the best interest of an investor to select a random position size, and it's not a good idea to set a uniform size for all trades, what is the best way to evaluate the optimal position for a trade?
Understanding Position Sizing
Position sizing refers to the size of a position within a particular margin, or the amount that an trader is going to invest. You should use position sizing to help determine how many shares can purchase, which helps them to control risk and maximize returns.
While position sizing is an important concept in most investment type, the term is most closely associated with day trading
KEY TAKEAWAYS
- tl;dr : start trading with proper position sizes on tradingdesk.cloud
Similarly, a trader should not just elect a pre-determined position size for all trades, regardless of how the trade sets up; this style of trading will likely lead to underperformance in the long run. So, if it's not in the best interest of an investor to select a random position size, and it's not a good idea to set a uniform size for all trades, what is the best way to evaluate the optimal position for a trade?
Understanding Position Sizing
Position sizing refers to the size of a position within a particular margin, or the amount that an trader is going to invest. You should use position sizing to help determine how many shares can purchase, which helps them to control risk and maximize returns.
While position sizing is an important concept in most investment type, the term is most closely associated with day trading
KEY TAKEAWAYS
- Position sizing refers to the number of units a trader invests in a particular trade.
- Determining appropriate position sizing requires a trader to consider the risk tolerance and the size of the account.
- While position sizing is an important concept in most every investment type, the term is most closely associated with faster-moving investors like day traders and currency traders.
- Even with correct position sizing, investors may lose more than their specified risk limits if order get executed below the stop-loss order.
Comment:
Account Risk
Before you can use appropriate position sizing for a specific trade, you must determine the account risk. This typically gets expressed as a percentage of your capital. As a rule of thumb, most retail investors risk no more than 2% of their investment capital on any one trade; fund managers usually risk less than this amount.
For example, if a trader has a $25,000 account and decides to set their maximum account risk at 2%, they cannot risk more than $500 per trade (2% x $25,000). Even if he loses 10 consecutive trades in a row, he will only loose 20% of the trading capital.
Before you can use appropriate position sizing for a specific trade, you must determine the account risk. This typically gets expressed as a percentage of your capital. As a rule of thumb, most retail investors risk no more than 2% of their investment capital on any one trade; fund managers usually risk less than this amount.
For example, if a trader has a $25,000 account and decides to set their maximum account risk at 2%, they cannot risk more than $500 per trade (2% x $25,000). Even if he loses 10 consecutive trades in a row, he will only loose 20% of the trading capital.
Comment:
Trade Risk
You as trader have to determine where to place your stop-loss order for the specific trade. The trade risk is the distance, in dollars, between the intended entry price and the stop-loss price. For example, if you intends to purchase Bitcoin-Derivatives at $10’000 and place a stop-loss order at $9000, the trade risk is $1000 per share.
You as trader have to determine where to place your stop-loss order for the specific trade. The trade risk is the distance, in dollars, between the intended entry price and the stop-loss price. For example, if you intends to purchase Bitcoin-Derivatives at $10’000 and place a stop-loss order at $9000, the trade risk is $1000 per share.
Using correct position sizing involves weighing three different factors to determine the best course of action: