Position sizing

[keithkar]

Hi everyone,

I'm new to the forum, and relatively new to trading. I officially started swing trading about 3 months ago, meaning my system is in place, I decided what markets I want to trade, I look for certain setups, I'm getting better with money management, etc.

What I'm struggling with a little bit now is how many positions to hold at any one time. I was thinking of taking half my capital and use it for no more than 5 open positions, and leave the other half in cash to start out.

Great forum, discovered it recently.




Thanks,
keith

 

[forker]

When you're starting out just focus on one trade at a time. Managing more than one position at a time will cloud your education and experience. All you will end up doing is layering the inevitable frustration and won't end up learning anything. When you can steadily grow an account then you can start adding more positions. I know this is off topic but I thought it needed to be said. With that out the way you should never expose yourself to a potential risk of half your account, that's like playing Russian roulette with half the chamber full. At most, and this should be a personal choice, risk what you are comfortable losing. That means if you have 6 trades, be comfortable with all of them going wrong in terms of capital loss

 

[keithkar]

I've actually been leaning in the direction you suggested. Things are getting a little overwhelming. I think I made the big rookie mistake of over-trading.

I've actually started to liquidate my positions over the last few days, and I'm to the point now where I just want to re-group, take a deep breadth, and start over.

Luckily I've been able to preserve capital, but I can see where things can get a little crazy when you're just starting out.

 

[FringFX]

Hi everyone,

I'm new to the forum, and relatively new to trading. I officially started swing trading about 3 months ago, meaning my system is in place, I decided what markets I want to trade, I look for certain setups, I'm getting better with money management, etc.

What I'm struggling with a little bit now is how many positions to hold at any one time. I was thinking of taking half my capital and use it for no more than 5 open positions, and leave the other half in cash to start out.

It is sensible for you to test several ways of going about it, specially since you have only just started trading. Most people go through this phase and it may take some time.

Try out different markets or different currency pairs. sooner or later you will be drawn to one or a few which you like best.

I agree with forker, start with just one at a time. You can always increase your position as your experience and confidence grows. Enjoy the process.

 

[tomorton]

I agree with forker that one position open at a time is good for now until reactions become automatic. But, just as you recognise over-trading is a trap, so is over-managing - sometimes this comes as the consequence of under-planning. I recommend that as you enter a position, you have at leats 2 exit prices already in mind - one is your stop where you will get out because price is going against you and is likely to continue through your risk tolerance, and the other is your profit target,where you will get all out as you judge price has travelled in your favour to a point where it is more likely to reverse so you want to bank the profits. You may also set an initial profit target where you might reduce your risk, say by banking half the profits, or by moving your stop to break-even. At this stage in life, your objective is to minimise risk, no tto maximise profit.

What I'm saying is, until you can see where to get out, don't go in. And if you can see where to get out, why not put your orders in, then just observe, don't tinker.