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As you know, the number of shares you can purchase is determined by your maximum loss and the size of your stop. This means that by increasing your risk, you can also increase the dollar value of the position you open. By simply shrinking your stop size, that is by setting a tighter stop loss, you can increase the dollar value of the position you open. To avoid a situation where you could end up with excessively large positions that may put your Forex trading float at risk, you can choose to introduce an extra rule. This rule would limit the dollar value of a position to be no more than a set percentage of your entire Forex trading float. For example, you might decide that you’ll never open a position that has a dollar value of more than 25% of your entire Forex trading float. The percentage that you decide upon will depend on the type of system you’re trading, the size of your float, and your personal tolerance for risk. Generally, smaller Forex trading floats might use 25%, and larger Forex trading floats might use as little as 10% or even 5%. There are no definitive numbers, and the percentage that you choose will depend on your personal circumstances. Once this tendency is corrected for you will have all your money management rules in place, ready to control your risk in the Forex market. Now you need to take the next step. Test your system to find out which of the variables best suit you, remembering always that position sizing is the most significant part of any system design. It is the lynchpin of money management. Once you’ve tested your system, and fine-tuned your rules, you will be well on your way to becoming a successful Forex trader. David Jenyns is recognized as the leading expert when it Discover the "secret formula" of trading that anyone can use Click Here To Download ==> Stock Trading Systems
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