Whether we were playing around with our demo accounts or playing with a few dollars in our live accounts, it was never far from our minds that our accounts would be a huge success in the future.
Unfortunately, many traders find it difficult to take the next step and trade larger positions.
Some people find it difficult to risk losing the small profits they have worked hard for over the past two months, while others cannot afford to risk larger positions.
There are certainly benefits to taking more risks, but be careful…
Although it can give you bigger gains, increasing risk can easily magnify your losses and wipe out your entire account.
To avoid falling into the trap of trading big, I will share with you three simple tips to guide you on how to increase your trading risk:
1. Make sure you are in the green zone.
Don’t even think about increasing the risks if you can’t make a consistent profit by trading with small amounts.
If you can’t trade small Forex trades successfully, what makes you think you’ll have any luck trading larger trades?
If you think and feel you are ready but your account is still in the red, focus on getting it back into the green first. That is what demo and micro accounts are for anyway.
Continue trading small positions until your performance justifies trading larger positions. After all, you don’t want to compound your losses with larger position sizes.
2. Take it slow and steady.
Just as you shouldn’t rush into fighting elite world champions just a few days after taking your first boxing lesson, you shouldn’t rush into increasing the size of your business.
You don’t want to bite off more than you can chew, do you?
Taking a gradual approach to increasing your position sizes in the Forex market is the key to getting used to taking more risk.
If you are not completely comfortable with the amount of risk you are taking, it will likely show on your account balance.
So instead of taking a big leap, Go for small, steady increments. This is unlikely to have a negative impact on your trading mindset, and will allow you to adjust to higher risks more smoothly.
3. Focus on percentages rather than dollar amounts.
I will tell you a little trading secret that will help you adapt to larger trading volumes:
Focus on percentages rather than dollar amounts.
Risking 1% on a $10,000 account is the same as risking $100. On the other hand, risking 1% on a $100,000 account is the same as risking $1,000. By risking the same percentage on a larger account, you are trading a larger amount.
It also helps you put your profits and losses into perspective when you focus on percentages.
Losing 1% of a $100,000 account isn’t much different than losing 1% of a $10,000 account. But when you put it in raw dollars ($1,000 vs. $100), it becomes a lot harder to swallow.
You should be able to move up to trading larger positions without any hiccups if you do it slowly and steadily, and focus on percentages rather than dollar amounts. But above all, don’t make the mistake of increasing your risk if you’re not consistently profitable on small trades.
