Hello and welcome to episode 102 in the basic investing tips series. I hope you enjoyed the first one and if you haven’t seen it yet be sure to scroll down or search for it on the site as its pretty awesome (If I do say so myself.)
Today we are going to look at something extremely important for beginner traders and that’s Unit levels. Let’s get started.
What Are “Units”
Units or unit levels are the specific cash amount you place into every trade. For example if I have £100,000 in a forex trading account and place £1,000 in a trade then my unit would be: £1,000. You can make 2 unit plays for stronger leans and 0.5 unit trades for potential investments you are not 100% sure about. But generally you should try to stick to the unit level in which you select. Unit levels vary from person to person but also from channel to channel. If I am making a forex trade then my unit is going to be a lot lower than if I am buying stocks in a company!
How to Calculate a Unit Level
The way I did this was talking to Tom at Eliteforextrading.com (He’s a professional forex trader as you can probably tell) and he put it this way: “Your unit level should be an amount that is greater than “ah doesn’t really matter” money but less than “Okay I need to slow down” – A good place to start for beginners is 1% of your total deposit or bankroll, although if you are confident then you can go up to 2% but never above that for CFD trading. Most professional traders with large accounts make around 0.5% of their account totals per trade.”
Again remember that this is for forex trading and currencies. If you are only using high percentage share trading then having a higher unit is advisable as you will be making fewer trades, probably less than 1 a week in most cases so having a 20% bankroll unit is probably fine, but just select it on what you can afford to lose! Not how much you think you will make!
That’s it for today’s article, if you enjoyed remember to share and subscribe! Thanks for reading!