How much risk is too much?

How much of your acc you risk per trade?

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bedsit

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Do you risk a certain percentage of your account (per trade) you wouldn't go over?

Is 10% close to gambling?

What about 5% - is it OK for master traders?
 
bedsit said:
Do you risk a certain percentage of your account (per trade) you wouldn't go over?

Is 10% close to gambling?

What about 5% - is it OK for master traders?
Click to expand...

It varies so much, I don't think there's a right answer. The cliché I suppose is no more than 1% - 3% per trade, and this is probably good advice for most people. However, I think more can be fine for certain traders.

Just speaking personally, certainly 3% would make me nervous, and as for 5 or 10, there's no way I'd be comfortable.

But everyone's different.
 
As long as you have enough margin, I think it should be ok

It takes far too long to top up account


Many thanks



Fredo


bedsit said:
Do you risk a certain percentage of your account (per trade) you wouldn't go over?

Is 10% close to gambling?

What about 5% - is it OK for master traders?
Click to expand...
 
Tantalos said:
As long as you have enough margin, I think it should be ok

It takes far too long to top up account

Many thanks



Fredo
Click to expand...



Do you use stops, or wait for a margin call?

What is your success rate if you don't mind the question?
 
Pazienza said:
It varies so much, I don't think there's a right answer. The cliché I suppose is no more than 1% - 3% per trade, and this is probably good advice for most people. However, I think more can be fine for certain traders.

Just speaking personally, certainly 3% would make me nervous, and as for 5 or 10, there's no way I'd be comfortable.

But everyone's different.
Click to expand...

Yeah - I see the point.
 
maximum risk = MIN(maximum which you are comfortable with, maximum your stats suggest you should risk to achieve your objective)

Statistics should take account of errors, leeway etc.
 
bedsit said:
Do you risk a certain percentage of your account (per trade) you wouldn't go over?

Is 10% close to gambling?

What about 5% - is it OK for master traders?
Click to expand...

Whatever drawdown you can mentally cope with and trade through the other side to.

When you're in a large drawdown and it surprises to the downside, you'll always wish you had traded less size in getting there, so err on the side of caution.
 
bedsit said:
Do you risk a certain percentage of your account (per trade) you wouldn't go over?

Is 10% close to gambling?

What about 5% - is it OK for master traders?
Click to expand...


And what is the probability of winning or losing this 5%? Is it, "If I lose, I lose 5% with certainty"?

Ideally you want an entire probability distribution, with details on expected return , value at risk, skew and kurtosis. Unfortunately, a method which uses stops takes away this versatility.
 
JRP2891 said:
Whatever drawdown you can mentally cope with and trade through the other side to.

When you're in a large drawdown and it surprises to the downside, you'll always wish you had traded less size in getting there, so err on the side of caution.
Click to expand...

What about when you're hitting new highs, surely then you wish you'd been risking more? Guess if you follow that it depends about which hurts more, not my type of thing though.
 
Hotch said:
What about when you're hitting new highs, surely then you wish you'd been risking more? Guess if you follow that it depends about which hurts more, not my type of thing though.
Click to expand...

I try to estimate the edge I have for each strategy based on historical and live trading, and then, given that level of edge and likely pay-off for the winner (e.g. if RR is 1.4 then the pay-off is 1.4), use the Kelly principle to determine the maximum % of my bankroll that I should risk for each trade belonging to the strategy. Though I don't use full Kelly, instead I use 1/4 Kelly to be the max risk per trade.

When I start with a strategy I risk a nominal $ amount per trade, then after testing I move to 0.5% then to 1%, and once I start feeling comfortable with the strategy and it consistently profitable I move it up to a max of 2.5% (which is often still less than 1/4 Kelly).

FYI I asked some similar questions a while back - here's the thread:
http://www.trade2win.com/boards/planning-risk-money-management/113254-1-risk-per-trade.html

I try to trade for a living and my trading BR is not supplemented by any other income - i.e. I have to trade conservatively.
 
1-2.5% max loss per trading day and you will never blow an account.....and if you do, you should never trade again lol.
 
Hotch said:
What about when you're hitting new highs, surely then you wish you'd been risking more? Guess if you follow that it depends about which hurts more, not my type of thing though.
Click to expand...

What trader doesn't wish they had more on when hitting new highs?? You can't trade without a stake though!

What is your "thing"?
 
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