🚨🚨🚨Risk Management and Position Sizing
Say you wanna long BTC for a 1:3RR trade, your portfolio is $10,000 and you wanna just risk 1% of your account.
To do so, first check the SL % in the trade you are gonna take. In the chart below SL is 2.5%.
To calculate your position size, take the risk amount and divide it by SL % and multiply it by 100.
Example-
Risk amount = $100 ; 1% of 10,000
SL % = 2.5%
100 (risk amount) / 2.5 (sl%) = 40
$40 * 100 = $4000
Therefore 4K is your position size. Now take a position worth 4K. You can either go $40 on 100x or $400 on 10x.
You can cross check validity via calculating the drawdown and gain.
Say you took $40 on 100x.
A 2.5% loss will give you,
$40(initial margin) * -250% = $100 Loss
A 7.5% gain will give you
$40 (initial margin) * +750% = $300 Gain
Think of taking trades as putting in $1 and taking out $3. This will make you a profitable trader.
Position sizing one of the most important thing when it comes to futures trading. Never randomly jump in trade, always calculate position sizing and risk.
