Size Up your Trade Position & Manage its Risk

This advice was obtained from an experience Gold traders, thought I share it here.

Every $1 move in Gold for 100oz is equivalent to USD100 gain or loss, if not, please stay far away from your PC mouse.

1. If you feel bearish, you short 100oz of Gold @ 930 and place a stop loss @ 960, your potential loss is USD3000 (960 – 930 x 100oz). Assuming your profit target is 900, your potential profit is USD3000 also. The risk/reward ratio is 1:1

2. If you feel bullish, you are willing to buy 1000oz instead of 100oz Gold @ 903, & your stop loss @ 900. Your potential loss is also USD3000 (903 – 900 x 1000oz). But assuming your profit target is 940, your potential gain is USD37,000. Your risk/reward ratio is 1:6

For both scenarios, you are risking the same amount of money, ie USD3000, but the reward is much higher for strategy number 2.

The difference is in sizing up your positions in strategy 2 but you have already pre-determined your potential loss.

That is why I always emphasis, please do not focus too much on entry techniques rather focus on your mindset, trading plan & risk management.

Managing your risk & position sizing is more important than any special indicators that you come across.

It is not the entry but your EXIT that book your profits. Take care of your downside & the upside will take of itself.

If your risk/reward ratio is always better than 1:2, in the long run you should be able to make significant profits as your trading system is having a positive expectancy.

And YES! The above strategies are only for illustration purposes, any trades taken are @ your own risk!

Manage your risk well and live strong, wish you every success in life.