{"id":293,"date":"2018-08-06T01:38:12","date_gmt":"2018-08-05T17:38:12","guid":{"rendered":"https:\/\/www.egobusted.com\/?p=293"},"modified":"2025-01-28T11:24:55","modified_gmt":"2025-01-28T03:24:55","slug":"equity-is-more-important-than-position","status":"publish","type":"post","link":"https:\/\/www.egobusted.com\/en\/equity-is-more-important-than-position\/","title":{"rendered":"Equity is more important than position"},"content":{"rendered":"

Positions was King<\/h2>\n

In my early trading life, I thought positions were very important.<\/p>\n

How can you make profit if you don’t take sides and have positions?<\/strong><\/p>\n

I was wrong. I busted several forex, futures, stock derivatives accounts (options, warrants, CBBC) in a row with this mindset.<\/p>\n

When I opened the first position and market moved against me, I added more positions because “price is cheaper, it’s sweet”.<\/p>\n

\"I
How I busted my accounts.<\/figcaption><\/figure>\n

The market usually returned to my view, only after I have margin calls<\/strong>. I have hit many margin calls because of high leverages.<\/p>\n

It was deadly frustrating.<\/p>\n

[su_spacer size=”40″]<\/p>\n

People Recommend the 2% Rule on Equity<\/h2>\n

[su_quote cite=”Investopia” url=”https:\/\/www.investopedia.com\/terms\/t\/two-percent-rule.asp#ixzz5NKCzkkI8 “]The 2% rule is a money management strategy where an investor risks no more than 2% of available capital on a single trade. [\/su_quote]<\/p>\n

Initially I thought it is a joke, a lie to retail trader like me. After busting so many accounts, there is a need for me to think about the 2% rule seriously.<\/p>\n

Risking 2% of your equity but you are looking at a 3:1 reward ratio, that’s 6%. I thought it was too little.<\/strong> (I think it is still too little).<\/p>\n

Don’t you think so?<\/p>\n

But..<\/p>\n

 <\/p>\n

Equity in Trading Equals to Your Life in Living<\/h2>\n

This is my current mindset.<\/em><\/strong><\/p>\n

Equity is the only measurement of trading success. It is not trend forecast, time prediction, or price target accuracy.<\/p>\n

Equity is a measure of how you actually trade.
\nIf you over-leverage or over-trade, your drawdown will be very deep and quick. You hardly survive in one mistake.<\/p>\n

This is why people recommend the 2% rule.<\/p>\n

 <\/p>\n

My version of 2% rule (Equity control rule)<\/h3>\n

I believe the 2% rule is more for a fund mananger or trader with deeper pockets. I am a very small retail trader. My trading aim is to grow my tiny account to a medium account, and to a large account.<\/p>\n

I now use a lower leverage (around 50X Leverage, or less) and I now look for quality trades in a month.<\/strong> I get a stand of the market and set Stop Orders.<\/p>\n

For example, in this trading idea:\u00a0AUDUSD, August\/6-10, Daily. Awaiting a drop to confirm breakout to the downside.<\/a><\/p>\n

The market is in sideway. Entering the market at this situation with Large leverage will burn yourself. Rather, I am now waiting for a trigger (0.7325<\/strong>) at the breakout zone to confirm my view (sell AUDUSD<\/strong>).<\/p>\n

\"Looking
I now look for better quality trades<\/figcaption><\/figure>\n

With a lowered leverage, it gives me more room for Stop Loss and see how the market reacts. In this case, the SL is at 0.7400.<\/p>\n

At this level, I think the downtrend is gone and the market is overall neutral. There is no reason for my sell orders to be\u00a0 kept open when market is not in a sell-tone.<\/strong><\/p>\n

I don’t follow the 2% rule but I feel much more comfortable setting trades with this method. Although I am still trying to increase my trading profitability, I am getting calm during volatility periods like the release of Non-farm payroll. My orders will get me in when the market aligns with my view.<\/p>\n

Once I am in-sync with the market, I have much higher chance to make stable profits.<\/p>\n","protected":false},"excerpt":{"rendered":"

Positions was King In my early trading life, I thought […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_gspb_post_css":"","footnotes":""},"categories":[10],"tags":[36,21,37],"class_list":["post-293","post","type-post","status-publish","format-standard","hentry","category-ramblings","tag-equity","tag-leverage","tag-quality-trades"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.egobusted.com\/en\/wp-json\/wp\/v2\/posts\/293","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.egobusted.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.egobusted.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.egobusted.com\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.egobusted.com\/en\/wp-json\/wp\/v2\/comments?post=293"}],"version-history":[{"count":4,"href":"https:\/\/www.egobusted.com\/en\/wp-json\/wp\/v2\/posts\/293\/revisions"}],"predecessor-version":[{"id":299,"href":"https:\/\/www.egobusted.com\/en\/wp-json\/wp\/v2\/posts\/293\/revisions\/299"}],"wp:attachment":[{"href":"https:\/\/www.egobusted.com\/en\/wp-json\/wp\/v2\/media?parent=293"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.egobusted.com\/en\/wp-json\/wp\/v2\/categories?post=293"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.egobusted.com\/en\/wp-json\/wp\/v2\/tags?post=293"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}