Example:
The account size is $4500.
We risk 2%, 90 cash, for this 2R trade.
If the trade idea is a success
we would now have 4678 cash in our account
a profit of: 178 cash
And if loss, a total of 4410 cash, 90 cash loss)
Is this correct?
Explanation:
The example seems correct but only without the fees in calculation.
Even small fees like e.g. 0.04% Taker...
Position sizing is determining the correct size of the position based on the amount of money you risk on the particular trade.
Before you can do that, you need to figure out what is the maximum acceptable risk of the trade.
That risk is usually expressed as a % of your balance, that you are willing to lose.
To make sure you don’t lose more than this amount...
