Amount per trade

A disjointed week of trading. Monday is for backtesting, at least for us for the near future. Tuesday was a day of local teacher strikes, so, as I don’t have a ‘proper job’ I’m asked to look after the grandkids. Of course, I say yes. Wednesday went well with a full win (I explain full win next). Poor communication resulted in a partial loss on Thursday. We spent the afternoon of Thursday resolving this through backtest and practise. Friday was the ‘non-farm payroll’ day which comes around every first Friday of every month and which, at present, we don’t trade. The week can be quickly eaten into if we don’t concentrate and dedicate ourselves to the task.

What do I mean by a full win? Take the average size of a market. Typically, we can trade the currency pair GBP USD with between a 20 (near) and a 60 (far) pip stop. (During a non-farm Friday up to 240 pip stop may be required).

We usually have a distant stop of 60 pips and a near stop of 20 pips, and we trade anything in between. We take two concurrent trades per trade entry. The first trade is a scalp (a reward that is at least one times the risk) and the second and simultaneous trade which is also a scalp or, wherever possible, converted to a swing (a reward that is at least twice the risk).

Putting on two trades each time or taking partial profits from a single trade, if your broker allows this, amount to the same thing. Two separate and concurrent trades have advantages but can be challenging to manage.

Back to our example, the minimum we can trade on the GBP USD is £1 per pip. Therefore, with a stop at 60 pips and two concurrent trades: that’s £60 + £60 = £120 per trade. Each trade must be the same regarding management and potential loss. With this in mind, a closer trade with a 20 pip stop would require £3 per trade ((20 x £3) + (20 x £3) = £120).

That is why for GBP USD we have a minimum trade of £120. If our stop is, say, 30 pips or 40 pips, then we have to do a quick mental calculation to know how much to trade to retain the same potential, pre-agreed, loss per trade.

Trades for us grow exponentially. As confidence increases, and we trade without emotion, then our trades will build. For example £120 per trade (£60 + £60 risk), £240 (£120 + £120 risk), £480 (£240 + £240 risk), £960 (£480 + £480 risk) and so on and so forth – but then we need to consider spread and the effect this has.

Each of the above represents a full win. At present, we trade £240 (£120 + £120 risk) per trade.

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