Exits and Position Sizing.
Exits and position sizing fulfill a traders vision. There is no right or wrong vision. A trader could earn 20% a month or struggle to beat the index. Either way it is his vision he is fulfilling.
A conservative trader will go about a defensive way in setting his exits. Every trading method is prone to Drawdowns. Spending countless hours fine tuning the trading method will not prove much fruitful. Instead he could set his exits to fulfill his conservative vision. One such way is as follows:
Entire position size be divided in two parts. The first part could be used entirely for defense. Its job is to cover the drawdown; A clear-cut task. As soon as half your position size is covering the current drawdown hit exit.
It is simple and has a very powerful meaning. It means, that half your trading method has a RR of 1:2 and the other half has no risk at all! This has a very powerful impact on a traders psyche. For a prolonged success, spanning decades, a trader is better off having a solid set of principles behind his trading rules as opposed to following trading calls or randomly making or editing rules.
An aggressive trader will want to use Position Size and Exits to the best. He knows that these two are the only aspects of his trading that he can control. So might as well break a leg.
One such approach would be to increase position size by, say, 10% after every two Stop Loss hits, for example. It also reflects that the trader is unfazed by string of losses. Needless to say aggressive trading requires several years of experience and an established trading account. There is a very clear distinction between being aggressive and taking the road to Boom and Bust.
Enjoy trading.
Exits and position sizing fulfill a traders vision. There is no right or wrong vision. A trader could earn 20% a month or struggle to beat the index. Either way it is his vision he is fulfilling.
A conservative trader will go about a defensive way in setting his exits. Every trading method is prone to Drawdowns. Spending countless hours fine tuning the trading method will not prove much fruitful. Instead he could set his exits to fulfill his conservative vision. One such way is as follows:
Entire position size be divided in two parts. The first part could be used entirely for defense. Its job is to cover the drawdown; A clear-cut task. As soon as half your position size is covering the current drawdown hit exit.
It is simple and has a very powerful meaning. It means, that half your trading method has a RR of 1:2 and the other half has no risk at all! This has a very powerful impact on a traders psyche. For a prolonged success, spanning decades, a trader is better off having a solid set of principles behind his trading rules as opposed to following trading calls or randomly making or editing rules.
An aggressive trader will want to use Position Size and Exits to the best. He knows that these two are the only aspects of his trading that he can control. So might as well break a leg.
One such approach would be to increase position size by, say, 10% after every two Stop Loss hits, for example. It also reflects that the trader is unfazed by string of losses. Needless to say aggressive trading requires several years of experience and an established trading account. There is a very clear distinction between being aggressive and taking the road to Boom and Bust.
Enjoy trading.
