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Thomas Long · #**226** (**permalink**) 06-11-2009, 07:26 AM

Quote:

Originally Posted by JForex

Hi,

I am facing a problem with position sizes.

My winning trades have over 200 pips at times, and losing trades only lose a few pips like 30 pips. Still, my losing trades lose equal or more money than my winning trades due to position size.

I risk 3% of my equity on all trades. If thats $300, and my stop is 30 pips, the position size is 1 lot. If this trade loses, I lose $300. Now some trades have wider stops. With the same $300 Risk, the position size is smaller, lets say 0.2. Now this 0.2 lot trade wins 200 pips and makes $400, but is almost a waste because only 30 pips have lost $300.

Does anyone else have similar problems? How do you guys handle this?

Is it wrong to allocate equal dollar risk to all trades?

We should be thinking in terms of equal dollar risk on all trades. I think in terms of percentage. I risk no more than 5% of my account balance at any one time, so if I lose a trade, I lose 5% on that trade. I also use a 1:2 risk:reward ratio on all my trades. Since I risk 5%, I look to gain 10% on each trade. So my overall results are based on my win percentage and my ability to stay in the trade until the profit target is hit. I will also move my stop to breakeven when/if the market moves halfway to my target to keep a potential winning trade from turning into a losing trade. But this consistent approach to money management remains the same no matter how much I have in my account or how many pips I risk on the trade. It is the consistent approach to trading and money management that can lead to consistent results. But using this approach, if you lose $300 on a trade, you should be in a position to profit $2000 when you are right. Think in these terms remain disciplined in your approach and good things can start to happen.