Amount per trade

A disjointed week of trading. Monday is for back testing, at least for us for the near future. Tuesday was a day of local teacher strikes, so, as I’m considered as not having a ‘proper job’ I’m asked to look after the grand kids. Of course I say yes. Wednesday went well with a full win (I explain full win next). Thursday was not so good with a half loss brought about mainly through poor communication between James and me. We spent the afternoon of Thursday resolving this through back test 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? This comes from the average size of a market. Normally, 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 normally 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 concurrent 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 difficult 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 in terms of 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 in our trades grows, and if we can retain the ability to trade without the amount on each trade emotionally affecting our decisions, then our trades will build as follows: £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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