Category: Trading methods
-
Lose 20% and you need 25% to get back: the arithmetic of loss and recovery
If you lose 20% of your starting amount, you need a gain of 25% to get back to where you were. The share you lose and the share you need to recover are not the same. This article is for people who keep money in something whose price moves and want to sort out how to count the size of a loss. By the end you will know three things:…
-
Build losing positions on purpose: sizing your lot from past losses
A losing position is not something to avoid. It is something to build on purpose. Before you enter, you decide how much you will lose if the trade goes wrong, and you arrange things so that is exactly what you lose. There is one reason for doing this: so that your past losing positions can be the baseline for choosing your next lot size. When your losses are all roughly…
-
How to invest with your liquidation price set in advance
A liquidation price is the price at which the exchange closes your position for you. Work backwards from your stop-loss line, and the liquidation price and the lot size come out of one calculation. Choose a lot without thinking about liquidation and it can arrive much sooner than you expected. Start from the liquidation price instead, and the most a single trade can cost is visible first. This article is…