Sizing of the Position

Let's dive into how to properly employ leverage utilizing proper “position sizing” now that we've learnt the painful lesson of trading too big.

The correct amount of units to purchase or sell a currency pair is determined by position sizing.

It is one of the most important skills a forex trader can have.

In fact, we'll go ahead and say it's THE most crucial talent.

First and foremost, traders are “risk managers,” thus you should be able to execute position size calculations in your sleep before you start trading real money!

It's quite simple to find the position size that keeps you within your risk comfort zone...and we use the term “relatively easy” loosely here.

A step or two must be added to the calculation depending on the currency pair you're trading and your account denomination (dollars, euros, pounds, etc.).

Now, we'll need five pieces of knowledge before we can start doing some math:

• Account balance or equity

• You are trading a currency pair.

• The percentage of your account that you want to put at risk

• Pips as a stop-loss

• Exchange rates for currency pairs in conversion