Managing Risk intraday

[Vaco]

We've all know that we should only risk 1-2% of our capital on any one trade and I personally like to keep it at 1%.

But if our long term goal is to make a profit every day, week, month then we have to also consider how we manage our overal risk on a daily basis.

This is something i've been thinking about lately and wanted to get other peoples views.

Would you have a % loss limit for the day before calling it quits (some say 3 losing trades in a row and you call it a day).

What about on the flip side do you call it a day after making a certain %(avoid giving your early gains back.

The idea is obviously to maximise each days potential whilst avoiding blowing a weeks or more profits in one bad day.

Thoughts anyone?

 

[£10kLoser]

I don't know that we should only risk 1-2% of our capital.

This has always seemed ridiculously negative to me - after all, that means we are allowing for at least 100 losses in a row. What kind of attitude is that?

I'm quite happy to risk 10% of my capital because I expect to make a profit, not keep losing and losing and losing...

Sounds to me like the concept is maintained by system sellers who don't want the people they've conned into buying to lose their capital too quickly. Think about it, given the fact that your contract size decreases along with your capital, you could make thousands of losing trades in a row with a large starting fund ending up trading 0.01 contracts.

The fact is that most people have to top up their trading account anyway, so their real trading capital is rarely limited to what's lodged with their brokers.

1-2% is far too small and encourages a negative attitude. Of course, beginners need to demo trade until they can prove a profit so anyone who trades real money without doing this first deserves to lose but if you can demonstrate a profit, 1% risk is far too small if you plan on making decent money.

As for number of trades and quiting after a certain profit, that depends on whether you are scalping 10 pips a trade or going for 60+ pips a trade. But I agree, you should stop after a certain profit or loss, otherwise it can be psychologically destructive.

My philosophy is that it's far better to make a very few good trades with larger contract sizes that be banging away for hopefully the same pip profit with numerous tiny trades. The whole approach depends on whether you can genuinely make a consistent profit.

If you can make a consistent profit, you don't need to limit yourself to risking only 1% and you can bump up your contract size, make fewer (choice) trades and have an easy life...

 

[Vaco]

hmmm, not sure about that mentality. No matter how good you are 3-4 losing trades in a row can easily happen and if you have a really bad day where you lose your focus that could easily ride to 8-9 with one or 2 winners thrown in.

At 10% risk per trade you could easily be down 30-40% of your pot. Now sure the next 2 trades may be winners that bring you back into profit but dealing with such a large drawdown can be psychologically draining and may impact your decisions.