Difference between Fix Lot and Fixed Fractional in Forex Trading
Differences Fix Lot and Fixed Fractional In Forex Trading – In forex trading there are several terms that you must understand. Its function is for you, it can be easier to respond quickly to markets that also move quickly. That way, you too can have the chance to get a big fortune. Well as a trader or person who dabbled in the world of forex, of course you’ve heard the term fixed lot and fixed fractional. Especially if you are already familiar with the concept of risk management in forex trading.
Understanding Fix Lot and Fixed Fractional
Understanding and studying these two terms is certainly not a difficult thing. As is known, if fix lots and fixed fractional are components contained in risk management. Even both are often compared to their functions. To find out more about fix lot and fix fractional and the differences, just look at the explanation below:
Fix lot is a risk management method that uses lots. This means that in each trade, you specify a certain lot size and this applies in each position. The lot size is usually adjusted to your risk capacity. This is because the fix lot is a risk management technique.
For example, you will calculate your capital ability and your risk rating. After that you consider lot of 0.1 is the most appropriate trading volume. Then for each of the next positions you do, you will always open a position with a size of 0.1. no less and no more regardless of what the pair is, the amount of take profit, stop loss and when to trade.
Fixed fractional is a method of calculating risk limits, with a maximum risk portion per trade of equity. This fixed fractional, usually expressed in percentages for example 10% of equity and so on. This is because, account equity is usually immediately displayed in units of money. So it is the case with fixed fractional. So you don’t need to guess, what is the value per pip to interpret the risk value of the lot size.
One thing you need to pay attention to in each trade, you cannot exceed $ 10. For this reason, later you need to find the right lot and stop loss distance. The goal is that the 1% rule can be fulfilled. But in the next calculation, it will actually be easier. This is because, you can adjust the proportion of equity directly
Difference between Fix Lot and Fixed Fractional
The following are some fix lot differences and fix fractional:
UNIT FOR CALCULATING RISK
The first thing that seems to distinguish the two is the unit used to calculate risk.Fix lot uses lot size to calculate risk. In contrast, fixed fractional uses the maximum portion of risk, to calculate risk
EASE AND HASSLE
The fixet lot initially looks easier. But the evaluation is more complicated. This is because, you need to adjust it to the proportion of equity. Besides that, the range of price movements cannot be equated to all pairs and trading time. This is what makes the fixed lot, can not be used to obtain a minimum risk that is stable.
Contrary to fixed fractional. Initially it looks complicated. But in terms of summarizing your trading evaluation, this method is more efficient. This is what makes this risk management method, more adaptive to be used in various trading sessions and pairs.
When both show the results of profit with the same direction flutktuasi, fixed fractional looks more visible turbulent than the fix lot. This is because, fixed fractional is more sensitive to changes and market conditions
When both are in a loss condition, fixed fractional is more able to brake the rate of decline in equity, rather than fix lot. This is because, fix the stiff is more rigid so it looks like a free fall and more quickly drains equity
Despite having differences, with the advantages and disadvantages of each. You could say both are like indicators and trading strategies. so there is no right or wrong choice in determining risk management methods. Everything goes back to the personal trader.
If you want simple trading settings and can keep the win rate stable, the fix lot is the right choice. Conversely, if you want more stable equity growth, fixed fractional is the safest choice.