Lot size calculation plays a crucial role in your success. Those who are making millions in profit know how to do perfect lot size calculations. They depend on the condition of the trade setup and volatility. Based on their initial assessment, they determine the pro traders determine the lot size in such a unique way. But determining the perfect lot size requires extensive skill. You might be worrying that you don’t have the precise skills to deal with such complex calculations. But after reading this article, you will get a decent idea of how elite traders manage the lot in different market conditions. Make sure you read this article very carefully so that you don’t have to deal with the complicated variables in lot size assessment.
Determining the stops
First of all, you need to determine the stops. Without determining the stops, it’s nearly impossible to determine the lot size. Let’s say you prefer a position trading method. So, it’s very natural you will be using a wide stop. For those who rely on wide stops, you must reduce the lot size so that they can afford the bigger stops. On the other hand, if you prefer to day trade or scalp the market, the chances are high that you will be relying on a big lot. So, it’s very clear that you can’t determine the perfect lot size without assessing the stops for a certain trade.
Spread of broker
This is very important but very few traders understand this feature. The spread of the trading instrument greatly depends on the Forex trading company. The good brokers like Saxo will always offer a tight spread trading environment so that you can increase the lot to a certain extent. But if you trade with a medium-class broker who deals who offers big spread, you have to reduce the lot in each. You might not be able to scale the lot in each trade in a unique way. But if you use the demo account, you will know how to scale the lots based on a dynamic spread. However, if you trade with a fixed spread broker, you won’t have to deal with such issues.
Risk tolerance level
Every trader has a different risk tolerance level. If you trade with a big lot, you must have the ability to accept big losses. But this is not so as it seems. You might have a big amount of money in your trading account, still, you might become frustrated just by losing a small amount of money. So, try to find your comfort zone so that you don’t have to feel frustrated with the losing trades. Once you have identified your risk tolerance level, you should determine the lot according to that threshold level. Never take too much risk in any trade to boost the profit. Go slowly and trade the market with discipline so that you don’t end up blowing up the trading account.
Learn from your mistakes
After knowing the key factors, you won’t be able to determine the lot size with precision. You have to learn from your mistakes. Mistakes are very common in trading. If you can identify the faults in the system, you will get the unique chance to boost the profit factors. To find the mistakes, you must learn to use the trading journal. With the help of a journal you can identity weakness and bring change to the system. Things might be hard at the beginning but once you start keeping track, you will learn to determine the lot size.
Those who are thinking that analyzing mistakes has nothing to do with the lot size. This is not all true. Rookie traders become good traders just by developing their skills over time. To do so, they must learn to find the faults in their strategy. Work on your mistakes and bring change to your lot size calculations.