Crafting Your Trading Style

When you figure out your trading style you are a lot closer to success.

Part 5: Discovering What Type of Trader You Want to Be

The fifth part of the system is figuring out what type of trader you want to be. This is determined by your capital, the risk you’re willing to take, and how much time you can spend monitoring the market.

You might be asking: How do I figure this out?

Step 1: Calculate Your Risk per Trade

Let’s take an example of trading with $1,000 capital.

You decide to risk 2% per trade.
This means your maximum risk is: $1,000 × 2% = $20 USD.

Next, let’s figure out how many pips you can afford to lose before you hit your $20 loss:

$20 ÷ $0.10 per lot = 200 pips.

So, it would take a 200-pip move against your position to lose $20.

Step 2: Compare Your Target Pips to Your Goal

Now, let’s say your monthly goal is to make 1,000 pips.

If you’re aiming for 1,000 pips and trading at $0.10 per pip, your income for the month would be:

1,000 pips × $0.10 per pip = $100 USD per month.

That’s about $25 USD per week.

Step 3: Assess Your Goal

Now, look at your goal. Let’s say you want to make a full-time income of $246 per week.

You’re missing your goal by $221 per week. What can you do? You have two options:

Increase your capital to trade larger amounts.
Increase the number of pips you earn per month.

For most new traders, increasing your capital is difficult, so the easiest route is to aim for more pips.

Step 4: Leverage and Pips

To achieve your full-time income goal of $246 per week, let’s calculate how many pips you need.

$246 ÷ $0.10 per pip = 2,460 pips per week.

You would need to make 2,460 pips per week to hit your goal. But if you’re taking only one trade per week, that’s going to be tough.

Step 5: Use Leverage the Right Way

To reduce the number of pips required, you’ll need to use leverage wisely.

Let’s adjust your lot size while keeping your maximum risk at $20 per trade:

$20 ÷ 200 pips = 0.1 lot size.
$20 ÷ 100 pips = 0.2 lot size.
$20 ÷ 50 pips = 0.4 lot size.
$20 ÷ 25 pips = 0.8 lot size.

As you lower your stop loss, you’ll be able to increase your lot size. However, with a lower stop loss, you need to be more precise with your entries since you could hit your 2% loss quicker.

Step 6: Calculate Your Weekly Pip Target

Now, let’s calculate how many pips you’ll need each week to hit your full-time income goal at different lot sizes:

$246 ÷ $0.10 per pip = 2,460 pips.
$246 ÷ $0.20 per pip = 1,230 pips.
$246 ÷ $0.40 per pip = 615 pips.
$246 ÷ $0.80 per pip = 308 pips.

Step 7: Pair Stop Loss with Lot Size

Let’s combine your stop loss and lot size to manage your risk effectively:

With a 200-pip stop loss, trade with 0.1 lots.
With a 100-pip stop loss, trade with 0.2 lots.
With a 50-pip stop loss, trade with 0.4 lots.
With a 25-pip stop loss, trade with 0.8 lots.

Conclusion: Crafting Your Trading Style

By understanding these key elements your capital, stop loss, and lot size you can customize your trading style to suit your goals and lifestyle. Whether you want to make small, consistent gains or aim for larger, more aggressive profits, the system can be tailored to help you succeed.