Everyone knows how powerful leverage can be when the asset you hold is moving in your favor but unfortunately the opposite of leverage can be very painful. It amplifies all your wins and losses to use a leveraged product such as CFDs. Now we are going to look at the best means to make your account intact and for you to make the most of the good times.
To preserve capital is important for trading success
New traders often set the goal of doubling their account size in 3 months only, but you'll soon realize that your long term success will rely on sensible techniques to protect your capital like risk management and position sizing. One of the greatest downfalls of amateur traders is their lack of understanding when it comes to how often a system will lose.
Many newbies often expect to have a series of wins right away but what happens is often the exact opposite which leads to low confidence and the hesitancy in pulling the trigger. During the first year, peg your goal at breaking even with the goal on every trade to minimize the losses and protect your capital.
Are you leveraged for success or failure?
The drawdown is completely the reverse of a rising equity curve. The manner wherein you allocate funds to trading using leveraged products will figure out the size of your wins relative to your possible drawdowns. It's the same thing as the saying that the higher your potential rising equity curve is the greater is your drawdowns. Your goal in running the CFD position sizing is to match the systems expectancy with it, while considering the ratio between risk and reward.
The simplest position sizing method for CFDs
Because of CFDs' leveraged nature, there are 2 major position sizing rules you can look into. One is the fixed percentage risk per trade (ie 2% of your total capital at risk on each trade) and the 2nd one is equal position size.
What is said to be the easiest means to allocate the capital is to use the equal position size rule where you put simply $5,000 in each trade. Because CFD trading lends itself significantly for short term trading you will soon discover your ability to calculate the position size that quick for you to be always ahead of the game. Any fancy calculations detract from the speed of trading and will ultimately cost you money. Each trade's equal position size makes it fast and easy to trade and to scale in and out of winning or losing positions in the market.
To preserve capital is important for trading success
New traders often set the goal of doubling their account size in 3 months only, but you'll soon realize that your long term success will rely on sensible techniques to protect your capital like risk management and position sizing. One of the greatest downfalls of amateur traders is their lack of understanding when it comes to how often a system will lose.
Many newbies often expect to have a series of wins right away but what happens is often the exact opposite which leads to low confidence and the hesitancy in pulling the trigger. During the first year, peg your goal at breaking even with the goal on every trade to minimize the losses and protect your capital.
Are you leveraged for success or failure?
The drawdown is completely the reverse of a rising equity curve. The manner wherein you allocate funds to trading using leveraged products will figure out the size of your wins relative to your possible drawdowns. It's the same thing as the saying that the higher your potential rising equity curve is the greater is your drawdowns. Your goal in running the CFD position sizing is to match the systems expectancy with it, while considering the ratio between risk and reward.
The simplest position sizing method for CFDs
Because of CFDs' leveraged nature, there are 2 major position sizing rules you can look into. One is the fixed percentage risk per trade (ie 2% of your total capital at risk on each trade) and the 2nd one is equal position size.
What is said to be the easiest means to allocate the capital is to use the equal position size rule where you put simply $5,000 in each trade. Because CFD trading lends itself significantly for short term trading you will soon discover your ability to calculate the position size that quick for you to be always ahead of the game. Any fancy calculations detract from the speed of trading and will ultimately cost you money. Each trade's equal position size makes it fast and easy to trade and to scale in and out of winning or losing positions in the market.