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Quality versus Quantity Forex Trading

Posted in Traders' Delusions, Submitted by Marco on Wed, 2006-09-13 10:01.
A different perspective on Risking a little or risking a lot: Quantity vs Quality trading

Just a similar thought to last week's post with the forex trading case study discussing the issues of risking a little or risking the lot. Similar concept, just a different perspective or twist.

Risking a little translates to a "Quality trade". You've put a little out, you're holding on for a large pip movement on the forex market. Armed with your trading system, which you've backtested and set your stops, you're ready for the large returns.

You have a large capital base. You want to risk the lot. (When I say "risk the lot" it isn't meant to be literal, I'm referring to large contract trades) Risking the lot is a quantity trade in two dimensions. One refers to the large contract size but secondly, this style of trading demands a larger number of trades. (Well, it's up to you how many trades you take, and perhaps "demand" is too strong a word for this context) [n.b. you must read the previous post so this article makes sense!] Actually it’s a lie, you don't have to take every possible trade, so if you're patient enough you don't have to take every possible trade. But since you are risking a lot you are only looking for a small pip movement to make a profit of the same magnitude compared to trading a little. And because it's only a small movement, this (may) allows you to take advantage of more volatile movements in the currency price. It's a matter of choice and it's up to you if you want to take the risk. However following this path may lead to another trading folly: overtrading.

Won't it be great if you can always have a good quality forex trade? Those are the trades I prefer... But the markets are dynamic, sometimes you've got to change your game play. But that's another story.

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