Practice Activity Answers Trade A Amount per pip: $10.00 Position size: 1.00 Trade B Amount per pip: $8.00 Position size: 0.80 Trade C Amount per pip: $9.00 Position size: 0.90
Beginners are not yet able to grade their trades so dynamic position sizing will be difficult. Percentage risk may be easier to get some consistency if we are talking about "beginners".
The easiest thing for beginners to do is to set a percentage size and use the long or short position sizing tool in TradingView to determine the position size based on that percentage
The easiest thing for beginners to do is to use the long or short position sizing tool in TradingView to determine the position size based on the maximum percentage of their account they're willing to risk in each trade
Why I much comfortable taking "Static Position Sizing" rather than "Dynamic Position Sizing" that we should identify any reliable (high-quality) signal or entry-triggers. "Static Position Sizing" much pretty consistent too
I get the concept, and think dynamic position sizing could benefit an experienced trader that knows his strategy / trade setup like the back side of his hand. But far to often, I've had terrible setups that bearly even justify trading, rocket to the moon. And perfect 10 out of 10 setups that continue sideways or trigger my stop... And that's trading a system I've been working on for years. I'm comfortable having a static risk percentage on each trade, but I will entertain this idea for a while to see i I get any benefit from it. All in all, great video! I like the idea.
Interesting tactics. Not so many people mentioned about this. IT's another opportunity to grow your small account instead of focusing on increasing capital or lot size. I am sure this tactic will survive your account in a long term as long as you find your edge and your know your risk.
Great video like always! That's one thing I mention to traders all the time. Every trade has a different set up and will require different stop loss and take profit placement, the position size needs to be adjusted accordingly.
There is no such thing as a fixed or static position sizing method etc. If you are to consider all the variables that play a part in risk management (account balance, position size, stop loss distance, percentage risk, avg win ratio) , it's easy to see that they cannot be fixed. Varying one will alter another and fixing one means one or more will be dynamic. Food for thought!
Thanks Nicolas. Very good subject. However, I believe dynamic position sizing is more of an advanced subject. When you’re a true beginner and working on your trading psychology, monkeying around with your lot size might agree you up even more. As a beginner it would be very hard to determine where good opportunities are.
Thanks for the feedback Ion. I agree beginners are unlikely to fully comprehend this first time around, but I prefer not to teach bad habits even if it makes things easier. It's one of the most common sticking points I come across even from pretty good traders, as they have incorrect risk management approaches. Instead, beginners have this to refer back to as they increase their knowledge and they then have a benchmark for what they should be aiming for. - Nicholas
That's more like an explanation for a beginner. Thanks. I hope we get much more like it in this series. I noticed that on a lot of web sites some comments clearly show a different level of beginner and perhaps should be classed as intermediate level. I'm only paper trading and trepidation is right at the end of my finger. So I'm pleased that I found your site at the start.
Thanks Mary, I’m glad you found this helpful. There will be plenty more beginner lessons coming (and there are already many more older ones on the channel). - Nicholas
Yooooooo same question I had fam What he is stating here is that we know one trade will work and that the other will not No one knows that ever if that was the case we would just risk nothing on all losing trading and go for broke on all winning ones I was waiting for someone to call this out and I’m glad that you did cause the math ain’t mathing You run the risk here just like u said on losing of higher positions sizes and gaining on smaller positions sizes Static position size based on risking 2% of WHERE THE STOP NEEDS TO BE Might be 1 point might be 20 But to place a lot size based specifically on that alone is the BEST WAY TO GO!!!
The order entry process is simpler with spread betting, since there is no need to convert between currencies or calculate a number of lots to trade. Instead it's just, e.g. "GBP per point", i.e. for every one pip on the chart, you gain or lose a certain amount of money in your account balance, denominated in your own currency. You still have to divide the stop distance by your chosen risk amount, but it is simpler overall. Do you have any thoughts about the appropriateness or otherwise of spread betting vs. other kinds of trading accounts?
Hi Nicholas. I calculated scenario A to be a $300 risk and $amount per pip as $10. Therefore the position size is 1 standard lot. But how do you buy this with an account size of only $25,000? I assumed that the scenarios for beginners would only include examples without leverage but I might be wrong. Does this mean that leverage should be used on this scenario, and if so, how is it structured within the trade? Thanks - Dan :)
The Duomo Initiative - Trading & Investing Hi fully understand that as I am a Trader in the FX market but you are talking to Beginners and they might think that’s normal. If they follow that type of strategy they will be stopped out most of the time. Thanks
I am a beginner and was taught to use the static position sizing, risking 1% each time. The reason being, in a long run, if the strategy has a certain success rate and if i only trade those with 2:1 Reward to risk ratio, then the outcome is more predictable. Could you elaborate why dynamic position sizing would be better seeing as even though we can assess that it is a better opportunity, there’s no guarantee of a success. What if we end up losing on the larger sizes and winning on the smaller sizes? Our account could end up in a loss in the long run. How does dynamic position sizing overcome this and what is the logic behind this?
A few reasons. Some psychological (lower probability means higher chance of sustained drawdown). Also if you have a lower positive expectancy there’s less margin of error so better to risk less on it. This video is about the 2% rule but the same principles would apply to your question: ruclips.net/video/Rn3yNO80DqI/видео.html
I have to disagree with you. As we know , "There is a random distribution between wins and losses for any given set of variables that define an edge". Your approach will perform fine if this wasn't true. However, as the distribution of results is random, if we enter to a sequence of 5 losses, with a risk between 1-2%, this will lead to a possible drawdown between 5-10%. In the other hand, if we consider a sequence of winners, with a risk between 0.5-1.5%, this will lead to a possible return between 2.5-7.5%. Of course this is considering a RRR of 1:1. If you have a RRR higher than 1:1, your win rate is probably lower than 50%, so your sequence of losses will be higher, although your return will be higher as well when you win. But you can't predict when losses and wins will happen, so I believe this approach won't work for most traders. Still, I think each trader should analyze if this method will produce good results for him. Not everything works equal for everyone. Great video!
🔹 Get FREE access to the Duomo Trader Development Program: duomotrading.com/FreeDuomoTraining 🔹 Add us on Instagram: instagram.com/duomoinitiative/ 🔹 Our second channel for financial news and analysis: ruclips.net/user/MarketMoversFinancialNewsandAnalysis
I've been doing this wrong! I've been think the 1% of say 4k (£40) would be the entry size!!! obviously I never traded that but that's where I was getting confused. So to confirm, I would use £40 as my stop loss and not my entry size?
Well I had to rewatch the part for the calculator like 5 times xD Then Went to an example and thought: Should've gone here from the start... So the answer to your practice sheets are: 1: AP: 10 PS:1 standard lot 2: AP: 8 PS:0,8 standard lot 3: AP: 9 PS:0,9 standard lot I still don't know how to determine the amount of risk and stop loss pips... There is a lot of things in front of me that I need co conquer
I still don't get that position size. If I trade a tested strategy with 60 % success. I will still win 6 out of 10 times and lose 4 out of 10 times? With higher position size it might get a bit uncomfortable for me when I lose. However. I guess that is just a matter of time and getting used to lose more and win more in. Is there something I am missing here?
I’m looking for someone who’s willing to help me take their time and help me learn how to calculate and understand position sizing and risks. When taking a position I want to know exactly what I’m risking (how, why) how much is required to take the trade (and why) with and without margin. These are the only concepts I struggle with. But I need someone who is patient to help me.
To go further that's why you have to TRACK your strategies on excel sheet or something else, then you will have some statistics on how are they profitable or not + %R(Risk/ratio). After enough tracking (guess at least 50 trades for a strategy is a minimum) you should be able to class yours strategies like : Premium setups (go for max risk 2%) ; low % of success like range configurations you risk only 0.50 or 0.25%. [It's only an example maybe you are mastering range environment :D, hope sooo]
Hi, to everyone. Can anyone help in regards to Trading. How to actually start trading, learn step by step, how to buy, brokers etc. Dr's & Consultants telling me not long to live but pulled through many times but I'm adamant to learn as further treatment is IMMENSELY Expensive & my condition has not changed. Requires guidance, . Can't afford expensive courses as whatever is saved is used for my treatment etc
too bad no automatic option for trading platform to calculate these for you..so you can concentrate on trading instead of calculating .. worst thing for me is to calculate position size when time is of essense..after signal for opening a trade is found its literally seconds before you miss your entry..
Practice Activity Answers
Trade A
Amount per pip: $10.00
Position size: 1.00
Trade B
Amount per pip: $8.00
Position size: 0.80
Trade C
Amount per pip: $9.00
Position size: 0.90
Amount per pip : $19
Size : 1.9???
Beginners are not yet able to grade their trades so dynamic position sizing will be difficult. Percentage risk may be easier to get some consistency if we are talking about "beginners".
The easiest thing for beginners to do is to set a percentage size and use the long or short position sizing tool in TradingView to determine the position size based on that percentage
The easiest thing for beginners to do is to use the long or short position sizing tool in TradingView to determine the position size based on the maximum percentage of their account they're willing to risk in each trade
loving these new series
Why I much comfortable taking "Static Position Sizing" rather than "Dynamic Position Sizing" that we should identify any reliable (high-quality) signal or entry-triggers.
"Static Position Sizing" much pretty consistent too
Wow your explanation is very great.
This is pure gold for the real traders
I Learn a lot in this new series !
Perfect explanation! Thanks 😊
I get the concept, and think dynamic position sizing could benefit an experienced trader that knows his strategy / trade setup like the back side of his hand.
But far to often, I've had terrible setups that bearly even justify trading, rocket to the moon. And perfect 10 out of 10 setups that continue sideways or trigger my stop...
And that's trading a system I've been working on for years.
I'm comfortable having a static risk percentage on each trade, but I will entertain this idea for a while to see i I get any benefit from it.
All in all, great video! I like the idea.
Interesting tactics. Not so many people mentioned about this. IT's another opportunity to grow your small account instead of focusing on increasing capital or lot size. I am sure this tactic will survive your account in a long term as long as you find your edge and your know your risk.
Great video like always!
That's one thing I mention to traders all the time. Every trade has a different set up and will require different stop loss and take profit placement, the position size needs to be adjusted accordingly.
By the way if a trader has the same setup on each position, it is ok to keep a static risk and stop loss etc. So this doesn't apply to everyone
There is no such thing as a fixed or static position sizing method etc. If you are to consider all the variables that play a part in risk management (account balance, position size, stop loss distance, percentage risk, avg win ratio) , it's easy to see that they cannot be fixed. Varying one will alter another and fixing one means one or more will be dynamic. Food for thought!
Position size is only one of the things you mentioned. It's static position size, not static risk management!
Can you provide your own example how you determine a good trade vs a decent trade so we know when to increase size and decrease size?
Thanks Nicolas. Very good subject. However, I believe dynamic position sizing is more of an advanced subject. When you’re a true beginner and working on your trading psychology, monkeying around with your lot size might agree you up even more. As a beginner it would be very hard to determine where good opportunities are.
Thanks for the feedback Ion. I agree beginners are unlikely to fully comprehend this first time around, but I prefer not to teach bad habits even if it makes things easier. It's one of the most common sticking points I come across even from pretty good traders, as they have incorrect risk management approaches.
Instead, beginners have this to refer back to as they increase their knowledge and they then have a benchmark for what they should be aiming for.
- Nicholas
That's more like an explanation for a beginner. Thanks. I hope we get much more like it in this series. I noticed that on a lot of web sites some comments clearly show a different level of beginner and perhaps should be classed as intermediate level. I'm only paper trading and trepidation is right at the end of my finger. So I'm pleased that I found your site at the start.
Thanks Mary, I’m glad you found this helpful. There will be plenty more beginner lessons coming (and there are already many more older ones on the channel).
- Nicholas
Yooooooo same question I had fam
What he is stating here is that we know one trade will work and that the other will not
No one knows that ever if that was the case we would just risk nothing on all losing trading and go for broke on all winning ones
I was waiting for someone to call this out and I’m glad that you did cause the math ain’t mathing
You run the risk here just like u said on losing of higher positions sizes and gaining on smaller positions sizes
Static position size based on risking 2% of WHERE THE STOP NEEDS TO BE
Might be 1 point might be 20
But to place a lot size based specifically on that alone is the BEST WAY TO GO!!!
The order entry process is simpler with spread betting, since there is no need to convert between currencies or calculate a number of lots to trade. Instead it's just, e.g. "GBP per point", i.e. for every one pip on the chart, you gain or lose a certain amount of money in your account balance, denominated in your own currency. You still have to divide the stop distance by your chosen risk amount, but it is simpler overall. Do you have any thoughts about the appropriateness or otherwise of spread betting vs. other kinds of trading accounts?
Loving the video frequency
Love this channel 😖😖😖
Great explanation...
Hi Nicholas. I calculated scenario A to be a $300 risk and $amount per pip as $10. Therefore the position size is 1 standard lot. But how do you buy this with an account size of only $25,000? I assumed that the scenarios for beginners would only include examples without leverage but I might be wrong. Does this mean that leverage should be used on this scenario, and if so, how is it structured within the trade? Thanks - Dan :)
can you make an example with stocks and stop loss in cents?
Thank you! Thank you! Thank you! The content is extremely helpful.
You're welcome William!
- Nicholas
Hi, how do you calculate this in BTCUSD futures contracts?
How do you determine the value of one pip in non-forex markets that don't involve lots?
What time frame are you trading as 10 to 20 pip stop loss seems a bit close to me. Thanks
It’s just an example. The numbers themselves don’t matter, it’s the calculation that’s important.
The Duomo Initiative - Trading & Investing Hi fully understand that as I am a Trader in the FX market but you are talking to Beginners and they might think that’s normal. If they follow that type of strategy they will be stopped out most of the time. Thanks
I am a beginner and was taught to use the static position sizing, risking 1% each time. The reason being, in a long run, if the strategy has a certain success rate and if i only trade those with 2:1 Reward to risk ratio, then the outcome is more predictable. Could you elaborate why dynamic position sizing would be better seeing as even though we can assess that it is a better opportunity, there’s no guarantee of a success. What if we end up losing on the larger sizes and winning on the smaller sizes? Our account could end up in a loss in the long run. How does dynamic position sizing overcome this and what is the logic behind this?
A few reasons. Some psychological (lower probability means higher chance of sustained drawdown). Also if you have a lower positive expectancy there’s less margin of error so better to risk less on it. This video is about the 2% rule but the same principles would apply to your question: ruclips.net/video/Rn3yNO80DqI/видео.html
I want to ask, does leverage effect this??
no
Amazing video , I use dynamic size in my trading
Thanks J B!
- Nicholas
Thank you
I have to disagree with you. As we know , "There is a random distribution between wins and losses for any given set of variables that define an edge". Your approach will perform fine if this wasn't true. However, as the distribution of results is random, if we enter to a sequence of 5 losses, with a risk between 1-2%, this will lead to a possible drawdown between 5-10%. In the other hand, if we consider a sequence of winners, with a risk between 0.5-1.5%, this will lead to a possible return between 2.5-7.5%. Of course this is considering a RRR of 1:1. If you have a RRR higher than 1:1, your win rate is probably lower than 50%, so your sequence of losses will be higher, although your return will be higher as well when you win. But you can't predict when losses and wins will happen, so I believe this approach won't work for most traders. Still, I think each trader should analyze if this method will produce good results for him. Not everything works equal for everyone. Great video!
His concept to risk 100% correct
How to identify opportunities
Hi I’m the dynamic position sizing example what is meant by 0.25 ‘standard lot’ what does standard lot mean? And what is meant by 0.25?
Is it 0.25 of the account value?
I trade stocks so I’m guessing this is a forex terminology?
What does it mean with "Double Position" and "Reverse Position" on an open trade?
🔹 Get FREE access to the Duomo Trader Development Program: duomotrading.com/FreeDuomoTraining
🔹 Add us on Instagram: instagram.com/duomoinitiative/
🔹 Our second channel for financial news and analysis: ruclips.net/user/MarketMoversFinancialNewsandAnalysis
Whats a Pip? Complete beginner here
I've been doing this wrong! I've been think the 1% of say 4k (£40) would be the entry size!!! obviously I never traded that but that's where I was getting confused. So to confirm, I would use £40 as my stop loss and not my entry size?
Correct
Well I had to rewatch the part for the calculator like 5 times xD
Then Went to an example and thought: Should've gone here from the start...
So the answer to your practice sheets are:
1: AP: 10 PS:1 standard lot
2: AP: 8 PS:0,8 standard lot
3: AP: 9 PS:0,9 standard lot
I still don't know how to determine the amount of risk and stop loss pips...
There is a lot of things in front of me that I need co conquer
I still don't get that position size. If I trade a tested strategy with 60 % success. I will still win 6 out of 10 times and lose 4 out of 10 times? With higher position size it might get a bit uncomfortable for me when I lose. However. I guess that is just a matter of time and getting used to lose more and win more in. Is there something I am missing here?
What is pips?
Maybe its ticks
LOVE
I’m looking for someone who’s willing to help me take their time and help me learn how to calculate and understand position sizing and risks. When taking a position I want to know exactly what I’m risking (how, why) how much is required to take the trade (and why) with and without margin. These are the only concepts I struggle with. But I need someone who is patient to help me.
❤
To go further that's why you have to TRACK your strategies on excel sheet or something else, then you will have some statistics on how are they profitable or not + %R(Risk/ratio). After enough tracking (guess at least 50 trades for a strategy is a minimum) you should be able to class yours strategies like : Premium setups (go for max risk 2%) ; low % of success like range configurations you risk only 0.50 or 0.25%. [It's only an example maybe you are mastering range environment :D, hope sooo]
Hi, to everyone.
Can anyone help in regards to Trading.
How to actually start trading, learn step by step, how to buy, brokers etc.
Dr's & Consultants telling me not long to live but pulled through many times but I'm adamant to learn as further treatment is IMMENSELY Expensive & my condition has not changed. Requires guidance, . Can't afford expensive courses as whatever is saved is used for my treatment etc
Totally disagree you can’t judge if a position has more potential before hand. It’s counter intuitive
Why am I not paying for these videos?
Go and pay for a rent boy
too bad no automatic option for trading platform to calculate these for you..so you can concentrate on trading instead of calculating .. worst thing for me is to calculate position size when time is of essense..after signal for opening a trade is found its literally seconds before you miss your entry..
TradingView does this automatically
Also XTB
Been trading a year wtf is a pip. Is this a British thing? A forex thing? Never heard this term in equities trading. This channel is kinda funky.
Pip basically means increments meaning every cent in stocks
1% is nothing when you have a smaller account