I want to know. When do you increase the lot size each time you trade? After gaining 100 pips? Or after getting more than 700 pips?
When your account has grown to a size that permits you to risk more money without going outside your money management rules
Whenever you made 20 or 50%
Expressing things in terms of pips doesn’t really help answer the question. It’s about what’s happening with your capital. As eddieb says, you increase lot size basically in line with increases in your account size.
One way is watch your margin to balance ratio. For example keep you margin no more than one tenth of your balance (or what ever you decide). More than one tenth increase you lot size. Less than one tenth decrease your lot size. If you had $1,000 Balance and margin could be around $100.00 than a lot of 1k or 2k depending on the pairs used could work. ([I]Risk declaimer here[/I])
It really [B][U]is[/U][/B] as simple as that.
It’s not about “when you’ve made 20%”, or whatever percentage, at all.
You have your money-management rules, which determine your position-sizing, and depending on the account granularity (position-sizing flexibility offered by your broker), you increase the size when your account has grown enough to increase your standard position-sizing by one lot/mini-lot/whatever without risking more than your selected proportion of your account, per trade.
If you’re trading a single lot, you’ll need twice the account-size (100% increase) to trade two; if you’re trading four lots, you’ll need only 25% more funds to increase to 5 lots, etc. So you can’t determine it by “percentage increases”. They vary.
I usually increase the lot size whem my account increase with 50%
I agree your view on this. Let’s say USD 1k to open 0.1, which means every USD 100 to open another 0.01. Nothing to argue about on this. Believe maths because trading is all about maths.
I think that it much better using not more than 5% of our balance, it will save our account.
A good money management usually use less than 60% on margin requirement from capital. But of course, not those 1:1000 leverages.
I agree with lexys,your balance size will determine how much you will risk on your next trade.
I don’t necessarily trade based off one lot size for all my trades. There are many factors that influence how large of a trade size I will take.
Quick scalps consist of my smallest lot sizes when I trade, each scalp trade lasts no more than one hour.
If I plan on holding for 2-4 hours it slightly larger than my scalp trade size.
Then 4-24 holds I increase my trade size as well.
Basically, the longer amount of time I plan on holding onto a trade, the larger my position size in that trade will be. This is because there is a more definite reason for my to hold for a longer period of time. If there wasn’t I wouldn’t be having such a large lot size. I expect the accuracy of the trade to be higher than my shorter term trades, so I am willing to risk more.
Sometimes with trades that I expect to hold for 3 or more days I may start with a small position on, then if the trade is going in my favor I may look to add to it at the best possible time (for example, a pull back etc). The longer/more days I plan on holding a trade for, the more likely I will add onto the position at times I think are best. Starting small and adding to a position that you plan on holding for a longer period of time can help protect from too large of a loss if you were dead wrong. Yet, if you were correct it could be a bit frustrating. But that’s why you should think about losses more than profits. Managing risk can be very important because even if you are more cautious you can still make more overall because you will/should have less losses to [I]set you back[/I].
Buddy, this is an easy question.
You increase your lot size (NOT THE SAME AS ALL-IN):
When you know beyond the doubt that the market has gone berserk and made the biggest boo boo by being overly exhausted in its direction.
When you have adequate capital to do so.
Play hard and never back down when you are holding royal flush poker hand.
In summary, CERTAINTY and CAPITLIZATION are the main factors.
May I know what money management rules you follow and what about leverage? Then I can answer more specifically.
I am not saying that the traders that expressed a different opinion are bad traders. Everyone can find a trading style that fits him the best and be profitable BUT usually lotsize and risk per trade do not have much to do with pips won or duration of the trade.
This is how to determine your lotsize:
You just choose at the beginning the risk per trade that you can afford according to your risk management which should determine what % of your equity do you want to risk with each trade. E.g.: if you want to risk 1% and you are going to open a trade with SL of XYZ pips you should open that amount of lots so if you lose you wont lose more than 1% of your equity. Nowadays most of the trading platforms have tools that will calculate this for you automatically but if yours don’t you still have the option to take the calculator and a pen and use your brain. The best case will be to do that calculation before each trade because with each lost/won trade your equity is also changing and most probably your SL will not always stay the same.
This is how to determine your risk per trade:
0,5% risk per trade is considered a reasonable risk for a medium size account. No matter how small your account is any risk >5% is considered closer to casino approach than to trading.
When you have already started and embraced by your good results you are wondering if you need to increase your risk per trade don’t listen to your internal voice but use an approach like the KELLY CRITERION. It has different variations for different situation but in general:
K%=W-((1-W)/R) Where “W” is win rate and “R” is Return. Calculated for each of your traded asset classes/instruments etc… will give you the answer where to invest more money/time/efford.
Decrease your risk per trade when you are losing. Increase your risk per trade only when winning.
If you don’t like all this calculations and mathematical methods, you can still get back to the crystal ball or counting the number of won pips during full moon
I hope I have helped at least someone get out of the 95% losing traders.
In practice, I would never double up on a winning position as this would be either not justified by the TA or would exceed the total % exposure compared to my account capital that I wish to have in any single forex pair. Or both.
If you use a trailing stop on your first position, and move this to break-even, then an equally sized second position with the same risk would not increase your exposure. But this wouldn’t be justified by TA so I don’t use these.
Thank you, this helped and clarified things for me
Just amending my own post.
Since I was in this position with regards increasing the position size I have found it very profitable to do so, and it has led to the biggest gains which I have logged. I now see that pyramiding offers the opportunity of multiplying your gains without increasing the risk to your account capital.
But all this while I thought pyramiding is basically averaging down the entry price of the position.
The idea is that if you’re in a long position and price rises, you add to the position. So this would mean in effect averaging UP.
Its a tricky tactic…