Forex Position Size – Massive Gains Part 2

Today will mark the largest one day total profits of my entire trading career – with an impressive 9% overnight.

This brings me back to the topic of position size, and how I tend to see this as a much more “fluid” part of my trading plan as opposed to a static / formatted / predetermined element. Gains of this size could not be realized if only risking a static % of my total account balance per trade – every time I place a trade.

I have come to learn that “buying around the horn” makes much more sense in Forex ( and likely in any asset class) as it is virtually impossible to pick a single specific price level  – and put your entire trade on in a single order. As well – there are times when “the coast is clear” and stepping on the gas just makes sense – as both fundamentals and technicals align perfectly to provide a clear sign that “now” is the time.

Identifying horizontal lines of support and resistance PRIOR TO PLACING A TRADE is an extremely important aspect of my trading. When these levels are hit (or at least “close” to being hit) I start to buy in smaller quantities before the turn has been made – so that by the time price has reversed I am well into the trade. This type of strategy generally has me “selling to you” as I am well into profit and banking my returns around same time you’ve come to realize that price is now moving up.

The majority of large moves happen at the beginning, and for the most part retail investors tend to jump onboard after this move has been made. This is when the “smart money” is already selling their shares “into strength” – as they had already “purchased weakness” around the horn – before the reversal was made.

More in Part 3

Advanced Position Sizing: The Kong Method

Dynamic Risk Allocation Based on Market Structure

The concept of fluid position sizing extends far beyond simply increasing or decreasing your lot sizes. It’s about reading the structural mechanics of the forex market and positioning yourself accordingly. When I’m analyzing major pairs like EUR/USD or GBP/JPY, I’m not just looking at the current price action – I’m dissecting the entire risk-reward landscape that lies ahead. If I identify a critical support level at 1.0850 on EUR/USD with clear air down to 1.0780, but massive resistance stacked from 1.0920 to 1.0950, this asymmetric setup demands a different position sizing approach than a balanced range-bound scenario.

Smart money operates on this principle of asymmetric risk-reward, and retail traders who stick to their rigid 2% risk per trade formula are essentially bringing a knife to a gunfight. When the technical and fundamental stars align – perhaps a dovish ECB stance coinciding with a break below key weekly support – this is when you press your advantage. The market doesn’t care about your predetermined risk management rules when opportunity presents itself.

The Accumulation Strategy: Building Into Conviction

Buying around the horn isn’t just about spreading your entries – it’s about building conviction as the trade develops. Let’s say I’m targeting a USD/JPY short from the 149.50 region, expecting a move down to 147.00. Rather than throwing my entire position on at 149.50 and hoping for the best, I start with 25% of my intended position size at 149.30, add another 30% at 149.55, and complete the position with 45% at 149.80 if we get that final push higher.

This approach serves multiple purposes. First, it ensures I’m participating even if we don’t hit my primary target level. Second, it allows me to increase my position size as the market proves me right by showing the exact weakness I anticipated. By the time retail traders are panicking about USD/JPY “breaking out” to new highs at 149.80, I’m already positioned for the reversal with size that reflects my conviction level.

Institutional Flow and Timing Your Exits

Understanding when to take profits is where most traders fumble away their edge. Institutional flow operates on predictable patterns, and recognizing these patterns is what separates professional traders from the perpetual strugglers. When you’ve accumulated a position around key levels and price begins moving in your favor, the temptation is to hold for maximum gains. This is a mistake.

Smart money begins distributing into strength at the first sign of momentum. If I’m long GBP/USD from the 1.2650 area targeting 1.2750, I’m not waiting for 1.2750 to start taking profits. I’m selling 30% of my position at 1.2720, another 40% at 1.2735, and letting the final 30% run toward my target. This approach locks in profits while the momentum is still strong, rather than hoping the move extends to my theoretical target.

Reading Market Sentiment Through Price Action

The biggest gains in forex come from positioning yourself ahead of major sentiment shifts, not chasing moves after they’ve already happened. When central bank policy divergence creates structural imbalances – like the BoJ maintaining ultra-loose policy while the Fed remains hawkish – these create the foundation for sustained directional moves that can generate outsized returns.

But timing these moves requires reading the subtle shifts in market behavior that precede major reversals. False breakouts above resistance, declining volume on rallies, and divergences between price and momentum indicators all provide clues about underlying sentiment. When I see retail traders flooding into carry trades or momentum plays, this is often my signal to start positioning for the reversal.

The key is having the patience to build positions gradually and the discipline to take profits systematically. Markets reward those who can think several moves ahead, not those who react to what’s already happened. Position sizing isn’t just about risk management – it’s about optimizing your exposure to capture maximum profit when the setup is right.