The volume of the transaction is; The number of units of an asset that we can acquire by paying the equivalent price. The unit of asset counting varies in different types of investment markets. Simply put, the volume of transactions in the financial market is calculated by dividing the amount of capital by the price of each unit of assets.
However, the purpose of determining the trading volume is to select the optimal volume in proportion to the potential risk of the trading position, which we will discuss in the following.
The main reason for the importance of determining the volume of transactions in financial markets is to pay attention to transaction risk and observe capital management. Because the risk of a trading position is entirely related to the volume of investment.
When we trade with a high volume, we will have higher risk and, of course, higher returns; Because in either case, whether our forecast is right or wrong about the future of the market, because we have more of that asset, we will have the same amount of profit and loss. Proper and reasonable investment means that we never involve all our capital in a particular trading position and always determine the volume of the transaction according to the maximum tolerable risk. In fact, we have to enter the market with a part of our capital and have certain exit points so that a small part of our assets is endangered and our long-term survival in the market is not harmed. In order to explain the effect of volume on risk And the return on investment we simulate and compare a loss-making trading position with two traders with different capital management approaches.