How to Determine Positions in Day Trading

One of the key points of day trading is position selection. Positioning is also a kind of leverage. Heavy positions can amplify profits and losses, which is a double-edged sword.

Calculate your risk

Before choosing a position, determine your risk. In general, it is recommended to use the 1% risk factor rule to control 1% of total assets as risky assets. For example, if the total assets are 10,000 US dollars, the maximum loss for this operation is 100 US dollars.

As shown in the figure below, knowing this point is not difficult to understand.

After opening a position, you need to look for the take profit level and the stop loss level after the market goes against expectations. There are many ways, so I won't go into them one by one. Commonly used are key support and resistance lines, as well as price trends, pivots, Fibo levels, etc. Which way you choose depends on your opening price - the stop loss level.

Spreads and Positions

The last step in determining the position is the spread. The spread is your actual profit or loss. If the position expands, the spread rises; if the position narrows, the spread decreases. So how big should the position be?

First, the risk factor is controlled at 1%, and then the value calculated from the spread between your risk value and the stop loss level is broken down. Then the risk you face is these spreads.

As shown in the chart below, if you have a $10,000 account, the risk value is $100, and a stop loss of 10 pips means that your risk is $10 per pip.

Risk Management Indicators APP

FXCM is currently launching aRisk Management Indicators APP, can be added to the market chart. As shown in the chart below, so that for us, various risk factors and take profit and stop loss and other points can be seen at a glance.

As shown in the chart below, EUR/USD trades when the position is 1 lot (100,000 USD).

The risk management indicator will calculate the appropriate trade size and stop loss level based on the trader's risk parameters. These trade details will be displayed directly on the chart. Traders can then use this information to build positions related to their risk appetite.