I woke up from an unsettling dream where employers were checking my c.v. out for being accurate and I was being found out!! 😈 And I had to earn a living trading because no one would employ me 😱
I had this idea in my head when I woke up which I've called:
Fryers Aggressive Risk Formula
Not sure if this is a good idea or a bad idea. So I thought I would throw it to the wolves and see if you can back test the risk formula to see if it is a help or a hinderance. I have never heard of this formula before but like a lot of novice traders I haven't concentrated on great technical books about money management. So I've made claim to the idea myself.
I think the idea of risk is vitally important so 2% exposion is not to be broken. But imagine if you had £10K given to you for trading and could be more aggressive with it! Its money you really can lose and it wouldn't hurt you if you did. I wonder how many people could really have afforded to lose the money we all have in our early trading exploits!? But if there was money you could lose, you could trade more aggressively with it, slacking up the 2% risk management to maybe as much as a 1/4 of this £10K. So, £2500. If you lose that you can then only risk 1/4 of £7500 = £1875 and so on. So it goes down along with this expendible amount: the aggressive capital. But allows you to have far greater trade sizes, but still keeping the risk contained.
Now, as far as trading is concerned... I had this idea of drawing a stake in the ground maybe every five or ten thousand pounds. £5K if your concervative £10K if you are more aggressive. The capital behind the stake is: safe capital. It is capital you will only allow 2% to be exposed per trade. Anything infront of the stake is the aggressive capital. This is recent profits, money that you wouldn't have otherwise had and is yours to do as you will, i.e. you can lose it and it wont hurt your staked safe capital.
So anything infront of the stake, you can risk up to 25% per trade. So the Fryers Aggressive Risk Formula would be:
risk amount = (safe capital*%2) + (aggressive capital*%25)
The beauity of this formula is that you can be more aggressive with the more 'expendible' capital but keep a close and guarded eye on your safe capital.. the stuff you dont want to lose! The only possible way you can get aggressive capital is if you are profitable as the stake cannot and will not be allowed ever to be moved back! Also, the amount of aggressive capital risked will always only be 25%. If you have a losing streak and you eat into your safe capital (in 2% increments) the safe capital stake point will always remain in place, e.g. balance: £15K, safe stake: £20K. You will only be able to use %2 risk until you regain your original safe balance size.
For more defensive concervative traders: if the account balance falls below the safe stake, risk percentage would be set to only 1%, only rising to 2% above the stake point!
You are being extremely cautious with your safe capital! But much more aggressive with expendible capital!
When your balance hits the next stake advancement, i.e. either £5K or £10K, the amount you can stake suddenly reduces as the entire account is considered Safe Capital.
e.g. up to £29K you could risk (20000 * %2) + (9000 * %25) = (400 + 2250) = 2650.
at £30K you could risk only (30000 * %2) + (0) = £600.
If your very first trade takes you below £30K, an optional protection is to use the %1 risk e.g.
at £29K with safe stake: £30K, risk = (29000 * %1) = £290
My thoughts are that if you have a winning formula that is being profitable but you want to have controlled aggression, you could actually accelerated your profitability by dividing your account up! The image of a safety latch comes to mind, it allows the cog to move forward quickly but wont let it fall back beyond the safety point.
How does this formula sound to you? Would anyone like to backtest it and see what its performance would be like?
Paul
I had this idea in my head when I woke up which I've called:
Fryers Aggressive Risk Formula
Not sure if this is a good idea or a bad idea. So I thought I would throw it to the wolves and see if you can back test the risk formula to see if it is a help or a hinderance. I have never heard of this formula before but like a lot of novice traders I haven't concentrated on great technical books about money management. So I've made claim to the idea myself.
I think the idea of risk is vitally important so 2% exposion is not to be broken. But imagine if you had £10K given to you for trading and could be more aggressive with it! Its money you really can lose and it wouldn't hurt you if you did. I wonder how many people could really have afforded to lose the money we all have in our early trading exploits!? But if there was money you could lose, you could trade more aggressively with it, slacking up the 2% risk management to maybe as much as a 1/4 of this £10K. So, £2500. If you lose that you can then only risk 1/4 of £7500 = £1875 and so on. So it goes down along with this expendible amount: the aggressive capital. But allows you to have far greater trade sizes, but still keeping the risk contained.
Now, as far as trading is concerned... I had this idea of drawing a stake in the ground maybe every five or ten thousand pounds. £5K if your concervative £10K if you are more aggressive. The capital behind the stake is: safe capital. It is capital you will only allow 2% to be exposed per trade. Anything infront of the stake is the aggressive capital. This is recent profits, money that you wouldn't have otherwise had and is yours to do as you will, i.e. you can lose it and it wont hurt your staked safe capital.
So anything infront of the stake, you can risk up to 25% per trade. So the Fryers Aggressive Risk Formula would be:
risk amount = (safe capital*%2) + (aggressive capital*%25)
The beauity of this formula is that you can be more aggressive with the more 'expendible' capital but keep a close and guarded eye on your safe capital.. the stuff you dont want to lose! The only possible way you can get aggressive capital is if you are profitable as the stake cannot and will not be allowed ever to be moved back! Also, the amount of aggressive capital risked will always only be 25%. If you have a losing streak and you eat into your safe capital (in 2% increments) the safe capital stake point will always remain in place, e.g. balance: £15K, safe stake: £20K. You will only be able to use %2 risk until you regain your original safe balance size.
For more defensive concervative traders: if the account balance falls below the safe stake, risk percentage would be set to only 1%, only rising to 2% above the stake point!
You are being extremely cautious with your safe capital! But much more aggressive with expendible capital!
When your balance hits the next stake advancement, i.e. either £5K or £10K, the amount you can stake suddenly reduces as the entire account is considered Safe Capital.
e.g. up to £29K you could risk (20000 * %2) + (9000 * %25) = (400 + 2250) = 2650.
at £30K you could risk only (30000 * %2) + (0) = £600.
If your very first trade takes you below £30K, an optional protection is to use the %1 risk e.g.
at £29K with safe stake: £30K, risk = (29000 * %1) = £290
My thoughts are that if you have a winning formula that is being profitable but you want to have controlled aggression, you could actually accelerated your profitability by dividing your account up! The image of a safety latch comes to mind, it allows the cog to move forward quickly but wont let it fall back beyond the safety point.
How does this formula sound to you? Would anyone like to backtest it and see what its performance would be like?
Paul
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