Salty Gibbon
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Do they give passports to Liverpudlians then ?
Salty Gibbon said:
Apparently they do, some of my friends have them supposedly. I do have to admit though, they are quite posh and extremely handsome, one of them even has a car!I, the other just had an inside the house Loo installed.WoW!
I asked my wife if I have Passport? She replied " Don't be so Silly" and go get the coal in.
safvan
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I will give you a small example of the way I trade, which most of you beginner traders should learn. You can be on high level margin and still risk only the capital you want to risk.
Say you have $1000 and on margin you are allowed to go up to $2000.
The stock you want to buy costs $5. Lets assume that your stop is at $4.50. You want to risk say 20% of the account. 20% of $1000 is $200.
Amount is risk/stop which is 200/.5 or 400 shares.
So it would cost you 400x$5= $2000 to buy 400 shares. Now you are 200% invested yet only risking $200 or 20% of your capital in this one trade.
You can risk as much as you want depending upon your risk tolerance. Bigger risks reaps bigger rewards and losses. Smaller risk, smaller gains and losses.
The correct amount to risk per trade really in the end of the day depends upon
1. Your level of expertise in your setup selection. Your trading experience.
2. Type of time length. Risk should be kept lesser for day trading.
3. Your stake worth. For small stakes you need to risk a decent amount of money to get a decent return. Without it you are just gaining and losing pennies. There is a huge difference between risking 20% of $1000 and 20% of $10,000,000.
Everything comes down to your level of expertise in your setup and this only comes with time and effort.
Say you have $1000 and on margin you are allowed to go up to $2000.
The stock you want to buy costs $5. Lets assume that your stop is at $4.50. You want to risk say 20% of the account. 20% of $1000 is $200.
Amount is risk/stop which is 200/.5 or 400 shares.
So it would cost you 400x$5= $2000 to buy 400 shares. Now you are 200% invested yet only risking $200 or 20% of your capital in this one trade.
You can risk as much as you want depending upon your risk tolerance. Bigger risks reaps bigger rewards and losses. Smaller risk, smaller gains and losses.
The correct amount to risk per trade really in the end of the day depends upon
1. Your level of expertise in your setup selection. Your trading experience.
2. Type of time length. Risk should be kept lesser for day trading.
3. Your stake worth. For small stakes you need to risk a decent amount of money to get a decent return. Without it you are just gaining and losing pennies. There is a huge difference between risking 20% of $1000 and 20% of $10,000,000.
Everything comes down to your level of expertise in your setup and this only comes with time and effort.
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Risk allocation is subjective, and finance theory puts individuals in roughly three categories:
(i) Risk neutral: if this is you, then you're the type of person who refuses the banker's offers except beyond the average of the boxes in "Deal or No Deal", i.e., if 1p and 250K was left you'd demand > 125K.
This is a rare type, but if it is you then you need to maximise the geometric rate of return using the Kelly criterion.
(ii) Risk averse: a constant percentage of capital or a decreasing percentage of capital as the account grows. The theory is that an extra £1000 of wealth means a lot when the account is £10,000 but less so when the account is £1m. In contrast, to the person in category (i) the level of wealth is immaterial.
If this is you, then there is no set % to risk - it's subjective and is known as your "coefficient of relative risk aversion".
(iii) Prospect theory: unfortunately this is what most people belong to. People prefer to risk more and more after a string of losses, but are almost immobilised by a wish to protect the status quo after a string of wins.
Best overall advice is try to be risk-neutral using the Kelly criterion on a small account, and switch to a declining percentage of capital approach if you're fortunate enough to build it up to a level that you care about.
(i) Risk neutral: if this is you, then you're the type of person who refuses the banker's offers except beyond the average of the boxes in "Deal or No Deal", i.e., if 1p and 250K was left you'd demand > 125K.
This is a rare type, but if it is you then you need to maximise the geometric rate of return using the Kelly criterion.
(ii) Risk averse: a constant percentage of capital or a decreasing percentage of capital as the account grows. The theory is that an extra £1000 of wealth means a lot when the account is £10,000 but less so when the account is £1m. In contrast, to the person in category (i) the level of wealth is immaterial.
If this is you, then there is no set % to risk - it's subjective and is known as your "coefficient of relative risk aversion".
(iii) Prospect theory: unfortunately this is what most people belong to. People prefer to risk more and more after a string of losses, but are almost immobilised by a wish to protect the status quo after a string of wins.
Best overall advice is try to be risk-neutral using the Kelly criterion on a small account, and switch to a declining percentage of capital approach if you're fortunate enough to build it up to a level that you care about.
safvan
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Managing risk with day trading is a lot different than trades that last few days to weeks to months to years.
It all comes down to your years of experience and hardwork. Nothing beats hard work and experience in your chosen field. You will only work hard and gain experience if you love what you do!
It all comes down to your years of experience and hardwork. Nothing beats hard work and experience in your chosen field. You will only work hard and gain experience if you love what you do!
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jolynnforex
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Trust me, I have been blowing my account numerous times within 2 years with a risking ratio. I trade 1 Lot with my $2000 account, the first day of my trading experience i got 50% in return but the following months it was like hell. Now i only trade 2% at most of each trade but I have developed a system that I only need 15-20pips of each trade so I could still have a big size.
Jolynn
Jolynn
Re: Thanks Paul
I've been trading several years now and I think the best way to learn this part of managing risk is to lose a lot and figure it out the hard way. Eventually you get it and start trading your plan. I however think it is OK to risk up to 5% on a swing trade. Day trading does not usually make sense however. A lot of traders take these stop losses constantly only to see the stock recover and move back up moments or days later. Pick a good entry (HPS) and a good quality stock and a good time of the year/week/cycle to trade and you lessen risk significantly. Remember to not trade with 'scared' money.
J
I've been trading several years now and I think the best way to learn this part of managing risk is to lose a lot and figure it out the hard way. Eventually you get it and start trading your plan. I however think it is OK to risk up to 5% on a swing trade. Day trading does not usually make sense however. A lot of traders take these stop losses constantly only to see the stock recover and move back up moments or days later. Pick a good entry (HPS) and a good quality stock and a good time of the year/week/cycle to trade and you lessen risk significantly. Remember to not trade with 'scared' money.
J
intradaybill
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You know you are talking mostly to forex scalpers here. 
foroom lluzers
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why can you not follow this 1% in practice?
EnlightenedJoe
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Same reason you are having trouble following it. If the trading technique is extremely inefficient, you have to risk 50% of the account just to make a couple of dollars.
Since most internet traders play with small accounts, they have no option but to go large. Otherwise they'd get 10x more pay by doing a job flipping burgers.
The 1% rule is only good for commercial entities where they have the funds to make 1% of it serious money.
In theory, a starting capital as low as £5,000 can produce a healthy profit, even with a mediocre strategy.
Try it -
100 trades
60% win rate
2.5% loss per losing trade (aiming for 2% but allow an additional 0.5% for spreads etc.)
3.5% win per winning trade (aiming for 4% to give a 1:2 r:r, but again allow an additional 0.5% for spreads etc., so true net r:r only 1:1.4)
The key is discipline. And the power of compounding.
Try it -
100 trades
60% win rate
2.5% loss per losing trade (aiming for 2% but allow an additional 0.5% for spreads etc.)
3.5% win per winning trade (aiming for 4% to give a 1:2 r:r, but again allow an additional 0.5% for spreads etc., so true net r:r only 1:1.4)
The key is discipline. And the power of compounding.
foroom lluzers
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If this advice was given to a new trader , he maybe unlucky and hit 4 break evens and 11 losses out of 15 consecutive trades , his account is not 27.5% in loss , but compounded to over 40 % loss of real money.
You can sing as much as you like , stay disciplined , because this new trader is going to lose all his discipline , as a result do revenge trades and emotional trades leading to a blow out of his account.Guaranteed!
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