Hi all,
I’m almost ready to trade live, after having completed my course
and demo trading for 2 months. However, with an initial capital
of $2500, should I trade micro or mini lots first?
What about $1000 capital? Micro or mini lots?
Also, is there any rule of thumb when it comes to increasing size
of positions?
For example, for every XXXX amount increase in capital from profits, add
1 lot or something like that?
All sound advice welcome!
Regards
Bryan
I don’t think you can really judge it in that way.
An example: maybe you may have decided to risk 1% of your account.
You are a scalper and decide to trade the M1 EUR/USD chart with a 10 pip stop loss, on a $1000 account you would be trading at around 0.1 lots
You are a longer term trader and trade the 4H with a 100 pip stoploss, to still risk 1% of your account, guess what - you’ll be trading 0.01 lots (or ten times less)
or any combination of the above - As far as I am concerned you should set your risk first. There is a calculator on the site to help with this.
IMO you should go risk / stop loss --> lots
Hope this makes sense.
Generally speaking, anyone new to the markets should start with micro (or smaller) lots. They allow you to trade smaller (which you should be doing) and offer a greater degree of flexibility in terms of getting the specific level of risk you’re looking for.
As for when to increase size, if you’re working off a % of account balance risk approach you will automatically increase size as your account increases.
Trade the smallest lots possible. Some brokers even allow you to “single units” instead of lots.
The smaller the lot, the more control you are giving yourself. especially since your are paying a spread per unit and not per lot.
Example:
1 Standard lot = 10 mini lots = 100 micro lots = 100,000 units
any of the above would cost $10 (assuming spread is 1 pip)
But, the advantage of having a smaller lot size, you can customize your orders as well as your real leverage better.
If you have $454 left in your account for example, and you want to place a trade that has a real leverage of 5:1, you can order 2270 units (2270/$454=5)
If you are working with micro lots, the closest to 5:1 you can obtain is by placing a trade of 2 micro lots which has a real leverage of 4.4x(1000/454 = 4.4)
If you are working with micro lots, the closest to 5:1 you can obtain is by placing a trade of 1 mini lot which has a real leverage of 22x(10,000/454 = 22)
Therefore, the smaller your lot size, the precise you can create your orders and the better you can manage your account
I think you are referring to “Scaling in”, “scaling out”, “Scaling up”, “scaling down”, “pyramiding” or “cost averaging”.
They are all flashy words meaning the same thing: either increasing or decreasing your position(amount of exposure) on the hunch that the price will go in your favor or against you.
There is no perfect solution, no free meal, and no “super secret”.
They all boil down to this: If you think the market will move in your favor and you want to increase your risk, add positions.
If you think the market will move against you, and you want to decrease your risk, close positions.
How much to add or remove? the more you add, the more you risk.
The more you remove, the the more profit or loss you “realize” which lowers your overall risk.
Sometimes its better to weather the storm? sometimes its not.
Just remember, Every time you open complete a transaction(open and close a position) you pay the spread.
I started roughly with the same size account as you are.I would start as small as you can.You might have a method good money management but the third part the emotions of trading live you have not experienced yet.It is hard to explain you must experience this first, good trading.
I have to agree I think everyone should start with a micro account when first going live. However dont take what I say as any real advice as today was my first day going live. I have not completed the school of pipsologly yet I am working on it. What I did notice though with going live is my risk tolerance inadvertently changed by alot just knowing it is real money now. even though with a micro your really only playing with pennies pretty much. If your as cheap as me I dont want to loose even the change in my pocket. When I looked at it as monopoly money I took bigger risks than I did today. Witch actually cost me a pretty significant amount of pips when the us dollar fell off a cliff today. I cashed out way to early just to take in profits. Then got greedy and lost it all and have been limping back since today. So I would say to learn risk tolerance with real money first. Then its up to how much you are willing to risk to answer that question.
Nothing further to add. 
Except to clarify that the lot size stays the same but as the account compounds up, the ‘X’ fixed percent will naturally be a larger $ lot.