Trading or Investments causing you sleepless nights or undue worry?

This is an aspect EVERY trader/Investor goes through at some stage in their learning.

It basically means that you have too much risk on the trade which puts you out of your comfort zone or

You are not 100% confident in your trading set-up/strategy.

There is a 3rd aspect but this is rare (to get that far before you realise) and this 3rd aspect is that Trading/Investing is just not for you, you are forcing yourself into a career/hobby that does not suit your personality.

The simple answers to solving this problem is for you to reduce and understand the risk your putting on each trade and/or learn a set-up that suits your preferred style.

I know of spread bettors in the UK putting £25 a pip on EURUSD – if the EURUSD is at 13000 then that’s the equivalent of placing hard cash to the value of £325,000 on the trade, th best part these people only have a £5k account size!!!!  Way way too much.

To give you an idea, If I had an account size of £325,000 the most I’d risk would be 1% = £3,250.  this then has the following effect – say the distance between my stop-loss and entry was 100 pips (£3250/100) = £32.50 per pip giving me exposure to only £422k, if I used the same principle ratio as our example above (65 times account size!) that would = £21 million!

Trading success is ALL in the maths I assure you.

When I go to bed I might multiple positions on to a hefty total value but at least I know and understand my ultimate risk at the end of the day.

Remember no-one knows what tomorrow definitely brings in the markets that’s why we are ALL gamblers and the gamblers that struggle or go bust are those that are simply abusing the laws of gambling and risk management.

This is why often you’ll see and hear that your set-up is not the most important part of your trading/investing – what they are getting at (without directly saying it) is that risk is the most important factor to your trading/investment.

Anyway food for thought.

The Hovis Trader

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