This is the quote of all quotes...

Trading is for life!... 

Those who miss Elfinchilde's meaty dish-outs may wish to catch up with her on her nice blog: at:-

                                                         Elfin's Blog (click)

• extensive TA knowledge that works in the forex market
• lengthy market experience
• independent/sound research capacity
• self-motivated attention to detail
• thorough and professional preparation.

The Holy Cow of Trading.

Another trader within my acquaintance recently related the story of his transition from demo to live.

He made a classic mistake, demo trading on a $100k account (because he liked the hit of seeing the zero’s spinning around), having a great time. Suggestions that demo trading the amount of his anticipated live capital was essential, went unheeded. He then went live on a $10k account, and promptly blew it up. He refunded a second time with another $10k, blew that one up too. Now he is trading a micro-account, and finally the lesson has sunk in – trade small to start with – give yourself room to get through the apprenticeship without the damage.

The big difference between demo and live is just one word - pressure. Some traders can handle the pressure, others can’t. Small position sizes accomplish several important things –

+ Small position sizes are the optimum way to contain the pressure. Small position size, small pressure. Big position size, big pressure. This is a critically important tool for managing the emotions of trading.

+ Small position sizes make allowance for the knowledge vacuum, the “what don’t I presently know about this, that I need to know” factor.

+ Small position sizes link in to the “Less is More” approach. A little trade at the right moment, goes a long way. In Forex, it doesn’t take a big position size to make a big return on investment. A small trade, well placed, can deliver big returns.

+ Small position sizes guarantee preservation of your account capital, and as such are the  primary tool for insuring yourself against losses.

+ Small position sizes ensure market longevity. No money, no trading.



Many experienced traders recommend small position sizes relative to the size of the account (not more than 2%) and regardless of market experience, for good reason.

Position size is however contingent upon two things. First, the level of risk the trader is comfortable with and second, the level of proficiency the trader has. Some traders are comfortable with high levels of risk, but under-estimate the second part of the equation, their proficiency.

If the trader is good at what they do, has a strong track record of success, an increased level of risk-reward can be a legitimate strategy. Some experienced/professional traders risk up to 20% of their account seed capital per total open positions (usually trading a basket of currencies simultaneously). The premise is that Forex is a speculative high risk instrument, it’s not the place for the bread and butter money of other investments, risk is the business du jour - as a successful professional trader they have literally “earned” the privilege to trade higher levels of risk.

The end purpose of longevity in the Forex market is to gain mastery of the instrument, to trade it with a high degree of accuracy and proficiency, accumulating consistently successful trades. Making it through the apprenticeship to reach the success objective is made possible by one thing, managing position size well.

Position size matters. Regardless of account size, trading style or market experience, it’s the key to unlocking and maintaining long-term success. In the early stages especially, it’s the key to survival.

Small position sizes also give the trader room to grow gradually into a place of comfort in coping with the pressure that comes with trading larger numbers as the success rate improves.

Safe and happy trading.

http://forexdistrict.com/jadegate_blog/position-size-%E2%80%93-holy-cow-trading