What matters in fund management is not fixed lot size but fixed loss amount

Hello, this is Leo.

This time, I will write about fund management, which is quite important in trading.Fund management

When people talk about fund management,

is a common question.

However, I believe that

as a concept.

Setting the same lot size every time is dangerous

For example,

let's assume the rule is to trade with 1 lot every time.

At first glance, since the lot size is the same every time, it may look like

Butif the stop loss width varies each time, the actual loss amount changes greatly.

If you trade all three with the same lot size,

In other words,fixing the lot size alone does not constitute true fund management.

What should be fixed is “the amount you lose when you lose”

What I think is important is to

For example,

Then

you would have

In other words,the number of lots can vary each time.

But,

this isthe fixed-amount approach

Concrete example

For example, fix the maximum loss per trade at10,000 yen.

Thus,

by adjusting the lot according to the stop loss width,

you can keep the loss amount nearly constant across trades.

Why is fixed-amount better?

The biggest benefit is

For example,

if you fix the loss per trade at 10,000 yen,

Of course, due to spreads or slippage, this can vary a bit.

Even so,

being able to know in advance “how much you will lose on this trade”

makes trading much easier to stay calm.

Fixed lot size makes unexpected losses more likely

Conversely, if you trade with the same lot size every time,

at times.

Even with the same 1 lot, a 10-pip stop loss and a 50-pip stop loss result in very different losses.

If you don’t manage this,

From there, to recover the loss you might increase the lot, or become fearful and decrease it, which can destabilize fund management.

Fixed amount also ties into mental management

When people think of fund management, it often seems like just money management.

In reality, it also directly connects to mental management.

People tend to lose their calm when they incur losses they did not anticipate.

Conversely,

if you know from the start that “this trade can lose up to 1万円,”

even if it stops out, it becomes easier to accept as a rule-based loss.

I think fund management is

and I believe this as well.

How do fixed amount and fixed percentage differ?

Another commonly used approach is

“risk 1% of the capital”

for example.

If the account balance is 1,000,000 yen,

the loss per trade is 10,000 yen.

The difference is inhow the capital changes.

In short, % fixed means the loss amount changes with the capital

and

is a method where losses scale with capital.

On the other hand, fixed amount means that even if the account balance changes slightly, you operate by keeping a constant amount for a certain periodsuch as 10,000 yen

Beginners find fixed-amount easier to understand

Personally, for someone not yet accustomed to fund management, fixed-amount is easier to grasp first.

In this way, decide an amount you can reasonably accept.

Then,

check the pips to the stop-loss position and adjust the lot size

This alone already makes things much more stable than entering lots without plan.

Do not align stop-loss width with the lot

This is quite important.

A common mindset is

This is the wrong order.

In other words,

and not the other way around.

Do not align the stop-loss with the lot.

Decide losses before profits

When you are new to trading, you tend to

think about how much you can win first.

But I think the opposite.

Then think about profits.

Changing the order even by a little can significantly change your trading.

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