Why that 1% rule might be a good idea...

shadowninja

shadowninja

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From another website...

I thought I would say that I have just lost a fortune with IG Index

Don't go into this with any real money. I have lost over 60% of my total wealth with one trade.

I have been doing this successfully for 7 years and now I am in debt to them and also in debt to City Index with whom I held the same position in the same share. The most annoying thing is that if my position was maintained I would have been around even now but I didn't have the capital to maintain it.

I have to sell my property to fund this and have a wife and 3 children who will need relocating to a smaller place.

Leverage first looked attractive but in these markets it is easy to get out of hand and just not suitable.

Be careful if you do any spreadbetting in this market and only risk what you can afford to loose.
Click to expand...

and

Yes I had a stop loss in place but the share fell a significant amount in a short period of time.
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and

I opened a large position in Citigroup on the 18th of November at around $7.85/95. I was then forced out of the position 3 days later at $3.90.

Seemed like a smart trade at the time but thing's turned bad very quickly in what I view as an overreaction.

When these kind of percentage moves can occur in such a short period of time you must to be crazy to contemplate using this kind of product.
Click to expand...

So, if you stick 50% of your account on a trade, you better be 100% sure that it won't gap down. ;)

Perhaps that is the way Spanish will blow up? (Or are ETX stops guaranteed?)
 
50% on 1 trade is crazy but what are your thoughts on the more common 3 to 5% risk pt?
 
I really don't understand why anyone would risk so much on one trade. Especially as a beginner. Even if i had 10 million i'd still start out for a few months at least trading just £1 a point. Once you've found a trading method that works, then you can scale up accordingly.

In my opinion, 3% is starting to get a little risky. 5% is beginning to ask for trouble. You better be very sure you have a good strategy before risking this much. It is unavoidable in very small accounts though, in which case, one has to be prepared for the fact that you could lose it all- it's going to be boom or bust- win a lot or lose it all. If you win its vital to reduce your risk levels to somewhere more appropriate and not get carried away. Alternatively, if you cannot bear the thought of wiping out a whole account it is a good idea to go away and wait until you have saved up enough capital so you can risk no more than 2% per trade.
 
What she said. :D

Of course, if you like to live on the edge, you could Vegas trade. Or Rio trade if you really want to live your life on the edge. :D

Vegas trade: put all your account on one trade. Either take big profits or get wiped out.
Rio trade: borrow as much money as you can from credit card companies, banks etc, sell all your possessions, then buy a one-way ticket to Rio, put all the money on one trade. Either take MASSIVE profits or get on that plane to Rio. :D

Thing is about 5% risk is that if in a simplistic way, you always bet 5%, that means you can take 20 losses in a row. At what point will you realise that your system is no longer working? After 3 losses? After 15?
 
Of course a 25% loss in account requires a 33% gain to get it back, (100% bank-25%=75%, recovery of that 25%loss is 33% of remaining 75% bank) 50% loss requires a 100% gain to recover (100%bank-50%=50%, recovery of that 50%loss is 100% of the remaining 50%)
 
Aye but he didn't risk 50%, he risked way more than his account on that trade.

He could have bought puts, know-what-I-mean ;)
 
Yes, if we assume he risked 100% of his leveraged account, and it spiked through his stop by an amazing amount then it would lead to him owing money.
 
it also kinda sounds like he ignored his stop to me...

I think ETX stops are guaranteed on the green account but could be wrong there.
 
Yeah but he did say he had a stop loss. Unless it was a mental stop and he tried that trick of getting hit by the gap down and then waiting for it to retrace back up.
 
i think there mandatory stops with etx but they arent guaranteed but theres no guarantee theyll let you open an account :p at least now i know why they didnt want my pennies when they can be taking thousands off people punting on citigroup of all things, does this guy not read papers or watch tv :eek: and holding a financial company over the weekend :sneaky:wonders do seize :p
 
The advantages of SB leverage are greatly over-estimated by some people. To me, the advantage of SB is its simplicity. Money management is another matter and important whatever your trading vehicle.

If you have to over-leverage you are either: stupid, greedy, consistently very lucky or have enormous balls forged from old-style Sheffield steel.

Why not just trade what you can afford?
 
I think 5% for day trading is quite "doable" but I personally wouldn't put up 5% or more for any time frame over or under 15 minutes. 3 Losses in a row and I would start to doubt my own ability in staying out the chop or taking profits rather then my system also stop loss would need to be looked at.

I guess this has as many variables as everything else in this business but yah big risk your simply gambling and I like the Rio analogy :D
 
Chaps, I just finished a month long spree trading GBP/USD with IGindex where I had some great wins (made 23k in 1 day!) but sadly some bad losses which bit by bit ate my capital. Overall am down 40k! Been a great ride! Lol! This **** really got my heart pumping, but remember to only risk what you can afford to lose cos 99% of you are gonna lose in the end, maybe not today, not tomorrow or in a months time, but sooner or later the party will end! Damn good fun though, but am gonna have to put my new sports car on hold :(
 
shadowninja said:
From another website...



and



and



So, if you stick 50% of your account on a trade, you better be 100% sure that it won't gap down. ;)

Perhaps that is the way Spanish will blow up? (Or are ETX stops guaranteed?)
Click to expand...

Thanks, this is a great post :)

I guess you have a great track record and follow the 1 percent for life.

2 or 3 years down the line ( or when your very good at trading ), you have to get good at raising money and when you trade you still follow the 1 percent rule.
 
cs0amc said:
Chaps, I just finished a month long spree trading GBP/USD with IGindex where I had some great wins (made 23k in 1 day!) but sadly some bad losses which bit by bit ate my capital. Overall am down 40k! Been a great ride! Lol! This **** really got my heart pumping, but remember to only risk what you can afford to lose cos 99% of you are gonna lose in the end, maybe not today, not tomorrow or in a months time, but sooner or later the party will end! Damn good fun though, but am gonna have to put my new sports car on hold :(
Click to expand...

I hope that was a demo account! If not you are either already wealthy enough to laugh about it, a compulsive gampler or just crazy!

I could have more fun in a month with 40k than putting a trade on. That's over a grand a day to indulge yourself with!
 
If he's having to sell his house I would guess it's a meaningful amount to him, is 40k 1% of your account or 60%? I couldn't imagine being either 23k up or 40k down in one day lol
 
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