money management technique and that it is carried out with consistency. Lets see how to determine the size of your stop-loss, as well as your position size, in order to still be on the safe side of money management. This means that if Joe was to lose his trade he would lose 2 of his overall 100 account. The high level of leverage available. This method is basically all about using the same percentage risk every trade no matter what the size stop for each and every trade. All further calculations will be based on this amount the amount youre willing to risk. For those traders who like to practice the "have a bunch, bet a bunch" style, this approach may be quite interesting.
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Remember, your trading account size, risk per trade and stop-loss (pips) are all together determining the position size you should take! Taking the example above, the size of your trading account is 10,000 and you want to risk a maximum of 2 of your account, that is 200. However, even a 1 point move against the trader would trigger a margin call (since 1,000 is the minimum that the dealer requires). Position sizing is important because it allows traders to adjust their trade size depending on the factors of the trade such as the pair and stop size. Technically oriented traders like to combine these exit points with standard equity stop rules to formulate charts stops. While a trader would need to earn 33 to break even after a 25 loss, the same trader would need to double his account after a 50 loss in equity! Working out the position size allows traders to make bigger or smaller trades depending on the different trades circumstances. One easy way to measure volatility is through the use of Bollinger Bands, which employ standard deviation to measure variance in price.
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