How Proper Position Sizing Can Mean More Profits

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Broker 2020!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Get Your Sign-up Bonus Now!

  • Binomo
    Binomo

    Good Broker For Experienced Traders!

Proper Position Sizing

As discussed in the previous section, the use of an equity stop and a chart stop can be combined to calculate position sizes for each trade. Many beginner traders make the mistake of setting the position size first before determining the stop loss in pips, which can lead them to neglect price action.

Proper position sizing allows the trader to have just the right number of lots based on how much of the account he or she is willing to risk per trade and on the size of the stop based on past price action and volatility.

In order to calculate the right position size for each trade, one needs the following inputs: account balance, pip value of the pair you are trading, percentage of your account balance that you are willing to risk, and the stop loss in pips.

The calculation is simple when your account is denominated in the same currency as the counter currency of the pair you are trading. For example, this means having your account denominated in dollars when trading EUR/USD or GBP/USD. The calculation is also simpler if you have a GBP-denominated account and you are trading EUR/GBP.

In this case, you simply have to calculate the monetary value of your risk on the trade, based on the percentage risk and your current account balance. If you have a $10,000 account and you’d like to risk 1%, then the monetary value of your risk is $100.

From there, you divide the amount risked by the number of pips. If you are trading EUR/USD with a hundred-pip stop, then the amount risked per pip is $100 divided by 100 pips or $1/pip. After getting this figure, you then multiply it by the unit-to-pip value of the currency pair you are trading to get the position size.

There are additional steps involved when your account currency is different from the counter currency. However, you can always make use of pip value or position size calculators available on most trading platforms or educational websites.

What’s important is that you use the percentage risk and chart stop as inputs to generate the position size and not the other way around. It takes practice to stick to this risk management habit and discipline to execute it regularly.

Next Article: [next_page]

Published by

IC Markets

IC Markets is revolutionizing on-line forex trading; on-line traders are now able to gain access to pricing and liquidity previously only available to investment banks and high net worth individuals. View all posts by IC Markets

Proper Position Sizing

Video Transcription:

Hey, traders. Welcome to Video 9 of the Forex Beginners Course. This is
Cory Mitchell. In this video we are looking at Proper Position Sizing
brought to you by Investoo.com.

So position sizing is one of the most important factors in long-term
trading success. It will either make you or break you. You are going to be
very hard pressed to find a successful trader who has lasted more than a
few years in the market who didn’t have proper position sizing down pat.

Ideally, you want to risk 1% or less, of your account, on a single trade.
The max is 2%. If you have a large account, you’re likely going to end up
risking less than 1%. So, if you have a $1 million account, risking 1%,
which is $10,000, on a trade, you’re probably not going to do that. You’re
probably going to be risking much less than that.

For smaller accounts, the tendency is to take too much risk. So they’ll
risk 5% to 10% of their own account on each trade, in an attempt to build
that account quickly. This is the completely wrong approach and will drain
your account very quickly.

You always want to risk 1%, 2% absolute maximum. That way, you’d have to
lose about a hundred trades in a row to even get down to the bottom of your
capital. And that assumes no winners. You’re going to have at least some
winners, even if you have no idea what you’re doing.

Just by random probabilities, you’re going to have at least a few winners
in there. So by risking 1% to 2%, you’ve basically eliminated the
possibility of getting your account blown out. What we call blown out is
when you lose all your money in a short amount of time.

So the amount at risk is the difference between your entry price and stop,
multiplied by the pip value and the number of lots. So in the next video,
we’re going to look at entries and stops. But for now, we need to know that
our entry price is where we’re getting in. Our stop loss is what we have
set our maximum, the price that we’re going to get out if the trade goes
against us. Multiplied by our position size, that is the number of lots
we’re taking.

So that is our risk. That is what this 1% or 2% is. I risk less than 1%,
some traders may decide to go up to 2% and that is what this risk is. So
it’s the difference between your entry price and stop multiplied by the pip
value. So the currency pair that you’re trading and the number of lots.

So let’s look at an example here. So, position size is 1%, so .01 of your
account size. So if you have a $5,000 account, that means your maximum risk
per trade is $50. The difference between your entry price stop times the
pip value and the lots must be less than this max risk. So in this case, if
your account is $5,000, whatever you’re risking on the trade must be less
than that $50, which is your max risk.

So let’s say you enter a trade in the EURUSD and place a 20 pip stop on it.
So you are entering the market at, let’s say, 136 and you think the price
is going to go higher, if it doesn’t, you’re willing to take a loss at
135.80 per 20 pips below.

So let’s do the mental math. I’m going to show you a formula in a second
but I want you to work it out a couple of different ways so that it sinks
in. So, you’re going to be able to do these things, these calculations very
quickly.

So let’s do the mental math. A EURUSD mini lot equates to $1 per pip. So a
20 pip stop means that you’re risking $20 if that price moves and hits your
stops, you’re going to have lost $20 on one mini lot. If you only lose $20,
that means you’re below your max risk, which is $50. So you still have more
money to play with.

If you take too many lots, so now each pip is going to cost you $2, and it
goes 20 pips against you, you’re going to be down $40. This is still below
your max risk, so you’re going to drop down to micro lots.

Micro lots are $0.10 a pip, so we have 20 pips times $0.10, so it’s going
to cost you $2 for each micro lot that you take, in terms of risk.
Therefore you still have $10 left over. Remember, we risked $40 already. We
have a maximum of $50 so we have $10 left over, which allows us to take 5
micro lots. So the ideal position size for this trade is 2.5 mini lots, or
you can think of it as 25 micro lots, whichever you prefer.

So this may seem complex but once you do it in practice, you’re going to be
able to come up with these precise position sizes. Even when making fast
paced day trades. So, originally this took a while for me to get used to.
But, day trading, swing trading and just doing it a lot, you’re going to
eventually be able to do it quite quickly.

So here is a simple formula. So your pips at risk is your difference
between your entry price and your stop, times your pip value, is going to
give you some number. Let’s just call it Y. Your total risk, which is the
amount that you can risk per trade. So that’s the 1% of your account,
divided by Y, will give you your position size. So you should always know
your total risk.

So this takes some of the math out of it. You should always know this. At
the start of each trading day, you look at your account balance. You know
what 1% is. And you know that that’s your max risk per trade.

So let’s say for example, you log in and your account balance is $3,300.
That means your max risk is $33. I’ll normally just stick with that
throughout the day. Even if my account balance may fluctuate up or down. A
couple hundred bucks, that doesn’t matter. It’ll just stay with that
number.

So, 37 pips risk, times $0.10. Let’s say we take this trade. It’s in the
EURUSD. And we see a set up and we want to put our stop 37 pips away. So we
have 37 pips of risk time $0.10, that’s the pip value of one micro lot in
the EURUSD. Which means, if we take one micro lot and our stock is hit, we
will have lost $3.70. So $3.70 is quite a bit below our max risk of $33, so
we can instantly tell we can take quite a bit more.

So all we have to do is divide our maximum risk by the risk of one lot. So
in this case it’s a micro lot. $33 divided by $3.70 equal 8.9 micro lots.
So, we can’t take 8.9 micro lots because a micro lot is the smallest
increment. But we can round it down to 8 micro lots that were under 1% or
we can round it up to 9 micro lots which would mean you’re just over 1%
risk. Still acceptable. So in that case, rounding up wouldn’t be too bad.

So as a general rule of thumb, if you have a large account, you’re going to
want to use mini or standard lots in this calculation. So, instead of using
$0.10 here, you would use $1. Because that’s what a min lot is. And in that
case, this number that it spits out will be in mini lots.

If you have a very large account, let’s say $1 million or more, or even a
few hundred thousand, you can put in $10, in this spot. And that means that
the number that gets spit out is going to be in standard lots. So you’re
going to be dealing in standard lots for the most part. So you can just
plug in $10 here instead of $0.10 to get your position size and standard
lots.

For most who are trading a small account, just always use $0.10 and that
will give you the number of micro lots you can trade. Easy to put in to
your software. And if you do need to convert it, let’s say you get 28 micro
lots. Just divide by 10 to get the mini lots. That’s 2.8 mini lots or 28
micro lots.

So this is the formula that you really need to understand. So your pips at
risk times your pip value. Each currency’s going to have a slightly
different pip value if the U.S. dollar is not the second currency listed.
So the EURUSD is always going to be $0.10 for a micro lot, $1 for a mini
lot and $10 for a standard lot.

If you switch in to other pairs, let’s say the GBP NZD or something like
that, that pip value is going to change slightly. It’s going to usually be
fairly close to this for most pairs. But it may change slightly. So you’re
going to want to check with your broker. Typically, they’ll have a sheet
that shows what the pip value is or how to calculate it.

And then this, you should always know your total risk divided by this Y
value to get your position size. So just get in to a demo account, practice
that as much as you can. Being able to calculate it quickly, if you need to
use a calculator, that’s fine. The point is that you want to always have a
proper position size that allows you to maximize your trades while also
controlling risks.

So, you don’t want to risk way less than 1% because you may not build your
account very quickly if you’re only risking a very small portion of your
account. But if you’re risking too much, let’s say 3, 4, 5, 6% on a trade,
a few losers and you’ve really drawn down that account.

So 1% to 2% is ideal. Calculate position sizes based on that. Go in to your
demo account. Put out some trades. Just practice calculating. Just make
some trades, eyeball them, we’re not actually trading. This is just an
exercise in position sizing. So just pick some trades, some random ones.
What would your stop be? Calculate out the position size.

Until next time, happy trading.

More About Adam

Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

How to Determine Proper Position Size When Trading – Any Trade, Any Market

A crucial element of trading success is taking the proper position size on each trade. Position size is how many shares you take on a stock trade, how many contracts you take on a futures trade, or how many lots you trade in the forex market. Position size is not randomly chosen, nor based on how convinced you are a trade will work out. Rather, position size is determined by a simple mathematical formula which helps control risk and maximize returns on the risk taken.

There are three steps to determining the proper position size, and it works for any market. We will then look at couple alternative position sizing techniques for specific circustances.

Position Sizing Strategy Step 1 – Determine Account Risk

No matter if your account is large or small—$1000 or $500,000–a single trade shouldn’t put more than 1% of your trading capital at risk. On a $1000 account, don’t risk more than $10 on a trade, which means you’ll need to trade a micro forex account. If your account is $500,000, you can risk up to $5,000 per trade.

While it’s not recommended, if you risk up to 2% of your account per trade, then on a $25,000 account you can risk $500 per trade. On a $50,000 you can risk $1000, and so on.

Why only 1% risk? Even great traders can experience a string of losses. But if you keep risk below 1% per trade, even if you lose 10 trades in a row (should be very rare!) you still have almost all your capital. If you had risked 10% of your account on each trade, and lost 10 in a row, you’d be a wiped out. Also, even with risking 1% (or less) on each trade you can still make great returns.

Only risking 1% also helps avoid the disaster scenario where you end losing much more than anticipated. A stop loss order doesn’t guarantee an exit at the price we specify. In a volatile move, or an overnight gap in price, we could lose substantially more than 1% (called slippage). If we only risk 1%, usually those devastating moves only result in a several percentage drop in equity which is easy to recover. Had you risked 10% on the trade though, such a move could wipe up half or nearly all your capital.

If your account is larger, you may wish to risk less than 1%. In that case, choose a fixed dollar amount that is less than 1% and use that as your account risk. A $1 million dollar account can risk $10,000 per trade, but you may not want to risk that much (not to mention, liquidity becomes an issue with bigger position sizes). Instead, you may opt to only risk $1,000, for example. $1,000 is less than 1% so it’s a suitable figure, and is the account risk ($) which you’d use in step three.

What is 1% of your account, in dollars? That’s your account risk, and it’s how much you can risk on one trade.

Position Sizing Strategy Step 2 – Determine Trade Risk

To determine our positions size we must set a stop loss level. A stop loss is an order that closes out the trade if the price moves against us and reaches a specific price. This order is placed at a logical spot which is out of range of normal market movements, and if hit, let’s us know we’re wrong about the direction of the market (at least for the moment).

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Broker 2020!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Get Your Sign-up Bonus Now!

  • Binomo
    Binomo

    Good Broker For Experienced Traders!

Figure 1 shows a trade example in the EURUSD. The price climbs into a former resistance area, but then stalls out, moving sideways then dropping. This triggers a short trade (a method covered in the Forex Strategies Guide eBook). The entry price of the short is 1.14665 and we place a stop loss at 1.15045. This results in a trade risk of 38 pips.

Figure 1. EURUSD with Entry, Stop loss and Trade Risk

You’ll need the trade risk in order to move onto the next step in determining proper position size. For forex, we measure trade risk in pips, in the stock market in cents or dollars, and in the futures market we measure it in ticks or points.

Assume you buy a stock at $9.50, and place a stop loss at $9.40. The trade risk is $0.10.

If trading a futures contract, how many ticks or points are there between the entry and exit price? If trading the E-mini S&P 500 (ES), and you buy at 1220 and place a stop loss at 1210, that’s a 10 point (or 40 tick) trade risk.

Position Sizing Strategy Step 3 – Determine Proper Position Size

You now have all the information you need to calculate the proper positions size for any trade. You know your account risk, and you know your trade risk. Since trade risk will fluctuate on each trade, and your account risk will also fluctuate over time as your balance changes, your position sizes will be different from one trade to the next, usually.

To calculate position size, use the following formula for the respective market:

Stocks: Account Risk ($) / Trade Risk ($) = Position size in shares

Assume you have a $100,000 account, which means you can risk $1000 per trade (1%). You buy a stock at $100 and a place a stop loss at $98, making your trade risk $2.

Stocks: $1000 / $2 = 500 shares.

500 shares is your ideal position size for this trade, because based on your entry and stop loss you are risking exactly 1% of your account. The trade costs you 500 shares x $100 = $50,000. You have enough money in the account to make this trade, so leverage is not required.

Forex: Account Risk ($) / (Trade Risk in pips x Pip Value) = Position size in lots

Assume you have a $5,000 account, which means you can risk $50 per trade. You buy the EURUSD at 1.1500 and place a stop loss at 1.1420, making your trade risk 80 pips. To complete the formula you’ll need to know the pip value of all pairs you trade. For the EURUSD it is always the same if you have a USD account: $0.10 for a micro lot, $1 for a mini lot, and $10 for a standard lot. For some other pairs it is different though. See Calculating Pip Value in Different Forex Pairs and Account Currencies.

Forex: $50 / (80 pips x $0.1) = $50 / $8 = 6.25 micro lots. Micro lots are the smallest trading lot with most brokers, so we can’t buy a partial lot. Therefore, we would round our position size down to 6 micro lots.

We know it is 6 micro lots because we used the pip value of a micro lot into the formula. To get the position size in mini lots, input $1 for the pip value instead. Doing so produces a position size of 0.625 mini lots, which is the same as 6.25 micro lots. The trade costs you $6,000 to make though (the value of 6 micro lots). To take the trade requires leverage.

Futures: Account Risk ($) / (Trade Risk in ticks x Tick Value) = Position size in contracts

Assume you have a $13,000 account, which means you can risk $130 per trade. You buy an E-mini S&P 500 (ES) contract at 1210.00 and place a stop loss at 1207.50, putting 10 ticks at risk (there are 4 ticks per point). You need to know the tick value of the contract you’re trading in order to determine the proper position size. For ES, each tick is worth $12.50.

Futures: $130 / (10 ticks x $12.50) = $130 / $125 = 1.04, or 1 contract. Holding a one contract position only costs about $500 in intraday margin (day trading) with many US brokers. If you hold overnight you’ll be subject to initial and maintenance margin. There is enough funds in the account to day trade this position or hold it overnight.

The Equal Dollar Amount Approach

I use another position sizing technique, typically in non-margined accounts like retirement accounts, etc.. Typically I am only trading stocks in these accounts.

In these types of accounts, I tend to accumulate longer-term trades, lasting weeks to months, or even years. Therefore, I don’t want to put all my capital in only a handful of trades, which often happens if using the 3-step approach discussed above.

Instead, I divide the account by 10 or 20, thus putting 5% or 10% in each stock I decide to trade. On a $200,000 account, I may put $20,000 into each stock. If there are a lot of possible trades out there, I may diversify a bit more and cut my account up into 20 positions, putting $10,000 in each.

Let’s assume I am putting 5% of my capital into each stock. On $200,000 account, that means buying $10,000 worth of stock on each trade. That doesn’t mean I am willing to lose all $10,000. That is just how much stock I buy. If the stock price is $25, I can buy 400 shares. If the stock price is $100, I buy 100 shares, and so on.

On each position, I still put a stop loss and control my risk. In order to take the trade, I need to reasonably expect that I can make at least make 2:1 on my risk. Typically I will want 3:1 or 4:1.

This approach is simpler for many people to understand. Buy a fixed amount of stock on each trade, and then set the stop loss wherever it should be for that trade. Make sure the profit potential justifies the risk. This is what my Stock Swing Trading Course is all about.

Equal Position Approach

I only use the equal position approach when day trading the same asset for extended periods of time. Whether it is a stock, forex pair, or futures contract, if I am trading it all the time I often use a default position size. Say 1000 or 2000 shares in a stock, or 10 contracts/lots.

This default amount, whatever you choose, shouldn’t expose your account to a more than 1% loss on each trade. While the odd trade may produce a bit more risk (and profit) than average, another trade will likely produce less, so over many trades it evens out.

With lots to think about in a fast moving market, a default position size is one less thing to worry about.

If it is a very volatile day, you will want to reduce your default size. If it is a very quiet day, you may want to up it slightly (or not trade). Therefore, a default position size doesn’t mean you don’t think about position size anymore. You still have to, you just don’t need to adjust it every trade.

Some assets work better with a default position size than others. Assets that tend to have similar volatility each day work well with a default position size. If it seems like you stop loss levels are very different on each trade, then a default position size won’t work well.

Proper Position Sizing Strategy – Final Word

The three-step method gives you the ideal position size for any market and any trade. When day trading you’ll need to quickly calculate your position size as you spot trades. Planning ahead will help in this regard, as discussed in How to Day Trade Forex in 2 Hours or Less. With a bit of practice, even when making trades on the fly, you should be able to nail the position size on your day trades every time. If swing trading, you have more time, so there’s no excuse for taking the wrong position size.

The method works for swing traders and day traders. Depending on which market you trade, master the formula. If you trade forex or futures, know your tick and pip values (or have them written down).

The equal dollar amount method works great for investor or swing traders in unleveraged accounts. There is less math involved because we always know how much stock (in dollars) we can buy. Then, we just set our stop loss and target on each trade.

Equal position size works for day traders who know the asset they are trading very well, and find that the distance to the stop loss on most of their trades is quite similar.

All these methods are work, although you may find one works better for your particular circumstance.

If you want to learn about day trading (or swing trading) successfully, check out the Forex Strategies Guide for Day Swing Traders eBook.
300+ Pages and more than 20+ strategies combined with trading psychology and a proven 5 step method for becoming a winning trader.

By Cory Mitchell, CMT @corymitc

You May Also Like

19 thoughts on “ How to Determine Proper Position Size When Trading – Any Trade, Any Market ”

Great article and very informative. I have been looking for the right position sizing for Futures trading and you have answered all. Thanks much. Do you have any blog on futures trading as well.

Thanks for the feedback. I primarily trade stocks and forex, so I don’t produce much futures content.

I have some questions that i can’t figure it out.
the question is in example : I have $1000000 and i will buy follow signal. Anyway i calculate trading size already. in the Bull market After the signal come out more and more my cash is running out untill my cash is running low and signal still come out I have 2 choices 1. Sell another stock(But still uptrend), 2.wait for the stock in my portfolio goiong to TargetPrice to sell and get in the new signal.

Please kindly advice

Hi Cory – for day trading when the market is less volatile and your SL and TP could be much smaller, for example 2 pip SL and 4 pip TP. Calculating the correct lot size for even a small account can result in large lot sizes. A $25 risk on a 2 pip SL results in a 1.25 lot or $125,000 for EURUUSD. In your opinion does using large lot sizes on low volatility like the example make it any more risky than a 10 pip SL at $25 on a more volatile trade that results in a .25 lot size or $25,000 for EURUUSD?

Yeah, i would say cap leverage at 20:1, and ideally be less than that. Any easy way to calculate this is to just always assume at least a 5 pip stop loss (and calculate position size based on that) even if you actually use a 2 or 3 pip stop.

So a $2000 account, can risk $20. Assume at least a 5 pip stop for the position size. So that means a possible trade of 4 mini lots (40,000), which means the trade utilizes 20:1 leverage.

The reason we want to cap our position size is in case of a surprise move (Trump says something and a pair that wasn’t really moving gaps 100 pips, creating a loss 20 times bigger than expected. Discussed here: http://vantagepointtrading.com/archives/20207. This doesn’t happen often outside of scheduled news releases (which we avoid when day trading), but could (and have) happened, so we gotta take some precautions to avoid that one catastrophic trade.

Also, to make it simple, you can also just pick a size a trade it all the time. Only if it is A LOT more volatile or sedate would you change it. For example, on a $2000 account you may opt to always trade 2 mini lots. This way, as long as the SL is less than 10 pips, you know you are risking less than 1%. Or maybe you trade 3 lots if most of your SLs end up being 6 pips (for this example). Since account balance doesn’t move a lot each day, typically you can trade the same position size for weeks, and make minor adjustments for increases/decreases in account balance and volatility ever few weeks.

All are viable methods, but yes, we want to cap our position size at some point.

Hi, Cory. Great information. Thank you for taking the time to write such informative articles and responses. Your generosity for aspiring traders is very commendable. Thanks to your articles, I’ve been able to realize many of my hangups.

Perhaps you, or one of your regular commenters, could help me with some of these questions.

1 – Assuming these conditions – a $50,000 account for trading stocks, 4:1 leverage ($200K) intraday, and opting to risk 1% of account ($500) per trade, with a chosen, fixed stop loss of $.10 from entry point, for any stock priced within a range to obtain 5000 shares (apprx. $40 per share or less).

If you were trading stocks intraday within these parameters, what fixed stop loss amount would you think is ideal? (e.g. $.10, $.12, $.15, $.20), again, assuming a stock priced near $40. Also assuming one is picking solid entries in first place of course (another topic), and not at random.

2 – I realize fixed stop loss amounts will vary based on share price ($.20 fluctuation for a $40 stock (.50%) is much more frequent/expected than $.20 fluctuation for a $4 stock (5%)).

Is there a fluctuation % you typically base your fixed stop loss amounts from when trading stocks intraday? (e.g. .3% of $40 stock = $.12, .3% of $67 stock = $.20) I’m thinking a .25-.30% move against a chosen entry is generally a pretty good indicator that a person’s assumption is wrong, with exceptions depending on the setup entry and timeframe.

3 – What is your opinion and personal preference on pyramiding, as a means to mitigate higher likelihood of stops getting hit, particularly in intraday trading and fast moving markets?

Additional Q – though unrelated to position sizing/stop losses.

4 – Based on your experience, do you think it’s possible to be successful intraday trading only 1-2 stocks in same sector for a long period of time (months or years), while ignoring all else, to include daily movements of the broader market (S&P 500), news, analyst opinions, etc.? And besides being merely possible, do you think such an approach is advisable? or would you say it is better to monitor a larger handful of stocks as well as the broader market intraday.

Thanks for you feedback John.

1. It depends on the volatility of the day and the stock. For a trade to take place, I typically wait for a pullback within a trend, and then for the price to consolidate during that pullback. Discussed in How to Day Trade Stocks: http://vantagepointtrading.com/archives/16708. I then enter when the price breaks out of the consolidation (in trending direction) and place a stop loss on the other side of the consolidation (occasionally I will enter during the consolidation). So my stop loss is based on the size of the consolidation. Typically these will be approximately the same each day for the same stocks, but may need to be adjusted by a penny or two.

2. I just use the method above. I am expecting the price to move in my favor after the consolidation breakout, so if it doesn’t, I will be stopped out. With this method I have no problem winning more than 60% of the time (and winners are bigger than losers), so no reason to get more complicated than that.

3. I typically do not pyramid. I would rather get in and out multiple times if there is a strong trend (assuming all opportunities provide the setup I am looking for and offer a favorable reward:risk ratio), locking in profits along the way.

4. For day trading, I think traders should focus on only a small number of stocks. I traded only SPY for a couple years (a good one for pretty much any time or any conditions). I traded only MCD for about a year. I traded only LULU for a long time. Now I mostly trade forex and I only day trade the EURUSD. Each week I publish a list of the most consistently volatile stocks. In that article, I recommend only picking 1 or 2 stocks and sticking with them (if you like volatile stocks, if not, find a stock or ETF that suits your trading style). Typically most fo the same stocks are on the list every week, so absolutely it is possible to trade only one stock…and its conditions can be favorable (for your strategy) for months or years. Then occasionally, you may need to make a switch, but not often. Only focus on the stock being traded, and not outside data (except be aware when news reports come out, and step aside for those). Focus on implementing your strategy in that one stock, and there is no reason to look at other data or input. This keeps trading very simple, which is good. When it is simple, it is easier to focus, and thus easier to trade better.

For swing trading I run stock screeners to find viable trades that meet certain criteria. In the forex market, I just have a list of close to 50 pairs that I scan through each day/week (depending on how often want to trade). I know exactly what I am looking for, so I can find and set my swing trade orders in less 20 minutes a night. So in swing trading I trade lots of different things, but for day trading I focus on just one stock/forex pair/futures contract.

Cory, thank you for the thorough response. I like your “keep it simple” approach. “Less is more” seems very applicable to trading.

Followup Q based on your response, do you ever make attempts to catch reversals at support/resistance points? Or just primarily focus on spotting/entering an existing trends during pullback / consolidation / continuation of trend?

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Broker 2020!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Get Your Sign-up Bonus Now!

  • Binomo
    Binomo

    Good Broker For Experienced Traders!

Like this post? Please share to your friends:
How To Do Binary Options Trading?
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: