Beginner traders who have already shown consistently profitable performance in trading should begin to consider increasing the position size or amount risked per trade. Bear in mind though that this increases the risk you take, which means that you might be exposed to larger losses and more emotional risks. With that, you could have a harder time concentrating on your actual trade as you could be overwhelmed by the larger amount at risk.
While this may be true, you also have to consider that a larger position size also opens up a larger profit potential on your trade. Going from 0.5% risk to 1.5% risk per trade can triple your possible profits, assuming that you win your trade. What you should remind yourself about is that your consistent profit record and expectancy should remain the same regardless of the size of your trade position. Here are some tips that could help.
First is profitability. If your account is in the green, then that's one of the go signals to trading larger positions. If you're in the red, you run the risk of digging a deeper hole by increasing your risk or position size so you might have to work on catching profits first before leveling up. In this case, stick to your usual risk sizes until you are positive, before considering increasing your risk.
Next is planning a gradual increase. Jumping from a normal risk of 0.5% to a 5% risk per trade can be overwhelming since you'd actually be risking ten times as much as you used to. Looking at this in nominal terms could be even more shocking so consider upping your risk in increments of 1% or 0.5% so that it's not too sudden.
The last tip is to focus on risk as a percentage of your account instead of the monetary risk involved. Aside from assuring that you are more focused on the trade details, this also helps you move on to larger account sizes without much psychological adjustments. Constantly thinking of risk as a percentage of your account can help you trade the same on a $1,000 capital to a larger $100,000 capital without being overwhelmed.
While this may be true, you also have to consider that a larger position size also opens up a larger profit potential on your trade. Going from 0.5% risk to 1.5% risk per trade can triple your possible profits, assuming that you win your trade. What you should remind yourself about is that your consistent profit record and expectancy should remain the same regardless of the size of your trade position. Here are some tips that could help.
First is profitability. If your account is in the green, then that's one of the go signals to trading larger positions. If you're in the red, you run the risk of digging a deeper hole by increasing your risk or position size so you might have to work on catching profits first before leveling up. In this case, stick to your usual risk sizes until you are positive, before considering increasing your risk.
Next is planning a gradual increase. Jumping from a normal risk of 0.5% to a 5% risk per trade can be overwhelming since you'd actually be risking ten times as much as you used to. Looking at this in nominal terms could be even more shocking so consider upping your risk in increments of 1% or 0.5% so that it's not too sudden.
The last tip is to focus on risk as a percentage of your account instead of the monetary risk involved. Aside from assuring that you are more focused on the trade details, this also helps you move on to larger account sizes without much psychological adjustments. Constantly thinking of risk as a percentage of your account can help you trade the same on a $1,000 capital to a larger $100,000 capital without being overwhelmed.