How To Choose A Perfect Lot Size.

Hello readers and subscribers, welcome to today’s post. Choosing a lot size should be based on the size of the account which is the trading capital. When you have decided on the lot size/volume, your next step is to ensure that you stick to it as long as your trading capital is still the same. It is much easier to implement these principles when you view your trading account as a business and not just a cash cow. I have published an episode on my podcast on this topic, you can listen to it HERE. Below are the 3 reasons why you should not increase your lot size.

1. You Are Too Confident.

I used to do this one a lot. I would increase my lot size when I felt more confident about a particular trade. A lot of traders do this as well. One would increase the lot size when they feel that they are sure that the market would go a certain way. That is a very dangerous way of thinking because when it comes to the markets, we are never sure and we cannot control what happens in the markets. The good thing though is that we can always control ourselves. By all means, never increase your lot size based on how you feel.

2. Your Account Has A Draw-Down.

A Draw-Down means you have lost some money in your account. Say you started your account with $1 000 and you have lost $100 and you are now left with $900, you account has a 10% draw-down. You have no business increasing your lot size when you have lost some money. Revenge trading is very dangerous. Never trade with the aim of regaining your lost money.

If your increase your lot size after a draw-down, you are not different from someone who just lost an income but instead of moving to a smaller house while they find ways to make an income, they instead plan to move to a bigger house where they will be required to pay more, it really doesn’t make sense. You do not upgrade until your finances are upgraded. By all means, never increase your lot size after a draw-down.

3. You Have Reached Your Daily Target.

Reaching daily targets is very nice but should not be a reason to increase your lot size. As much as minding your daily target is good, try not to focus more on what you can achieve daily but rather pay more attention on closing your books on a monthly basis because days are not the same and sometimes there are days when there won’t be any trading opportunities, you don’t want to be discouraged because of that. It also doesn’t mean that you will never reach your monthly target if you don’t reach your daily targets. The best way to measure your progress is at the end of the month. By all means, never increase your lot size just because you have reached your daily target.

When Exactly Should You Increase Your Lot Size?

You can only increase your lot size when your trading account has grown. Only then, does it make sense to adjust your lot size. Even when you do, try not to increase by a lot but just a little bit. I have published a more detailed audio version of this post on my podcast and you can listen to it HERE.

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