HOW DO I MANAGE MY RISK?
Money management is the most crucial part in trading Forex, CFDs, Stocks etc. An oversized position is high risk and can return high rewards but at the same time it may result in significant losses.
This is usually often ignored by many traders or simply don’t know anything about it; Position Sizing. It is very important and anyone actively trading the market needs to fully understand the importance and how powerful it can be in managing your emotions.
A position size is can be determined by the number of lots you are trading per trade. It can be identified as standard, mini or macros lots.
1 Standard lot (MT4 Value = 1.00): Approximately 100,000 units worth of currency and it is worth about 10 dollar per pip.
1 Mini lot (MT4 Value = 0.10): 10,000 units and it is equal to 1 dollar per pip.
1 Micro lot (MT4 Value = 0.01): 1,000 units and is equal to about 10 cents per pip.
For example, if you want to open Standard account and choose to trade Mini lots, 1 Standard lot would require 10 mini lots, 5 Standard lots would be 50 mini lots and so on. Each value is divisible by 10.
The actual size of your position depends on the accounts you have; Standard, Mini or Micro & how many lots you are trading. Remember, this topic is significant to understand because you can build your understanding of Position Sizing on a solid fundamental base.