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stockmarcus

Risk Per Trade for Intraday Trading?

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Hey,

 

Just would like to ask a subjective question to see what other people do.

 

For intraday trading what percentage of your trading funds do you put a risk?

 

Im learning the equity indices, and have started to think that 0.25-0.5% sounds reasonable, given 15+ trades in a session. How does that sound to experienced traders?

 

There are points that feed into this question im sure:

- How good your strategy is

- How easy is it to contain losses in your market etc.

 

Thanks

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Guest ivanbaj
Hey,

 

Just would like to ask a subjective question to see what other people do.

 

For intraday trading what percentage of your trading funds do you put a risk?

 

Im learning the equity indices, and have started to think that 0.25-0.5% sounds reasonable, given 15+ trades in a session. How does that sound to experienced traders?

 

There are points that feed into this question im sure:

- How good your strategy is

- How easy is it to contain losses in your market etc.

 

Thanks

 

I believe in fractional Kelly. I am currently using 1/4 Kelly trying to up it to 1/2 Kelly. To use Kelly you have to have an idea of your edge. For example if your edge is 10% - Kelly will be 10%, 1/2 Kelly 5% and 1/4 Kelly will be 2.5% of your equity per trade.

 

If your goals is optimal growth of your equity with disregard to the rest then Kelly is the way to go. If your goal is preserve capital then fix betting with less then 1% will be good.

 

At some point one finds that his edge is real and I would suggest pushing it to up to 1/2 Kelly. Full Kelly is not applicable as there is no way to know for sure that your edge is constant. The draw down will be devastating by the time you find that you need to adjust the bet size.

 

It seems that the usual 2% suggested by many books and traders works good for most. This would suggest an edge of 5% to 10% for most. I am crazy to be assuming that my current system gives me 20% edge. It is working for me so far so I am using 5 to 10% bet sizes. But don't try this unless you relay relay think that you have 20% edge.

 

Another fought is that you need a certain number of trades to be able to determine your edge with good statistical probability. I use 60 trades for me. It is different based on your projected win%.

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Hey,

 

Just would like to ask a subjective question to see what other people do.

 

For intraday trading what percentage of your trading funds do you put a risk?

 

Im learning the equity indices, and have started to think that 0.25-0.5% sounds reasonable, given 15+ trades in a session. How does that sound to experienced traders?

 

There are points that feed into this question im sure:

- How good your strategy is

- How easy is it to contain losses in your market etc.

 

Thanks

 

You entry dictates your risk. You can not have a mental stop. 1 to 2% per trade risk is a general guide line; it is good.

 

It is the trader who is suppose to design risk/reward ratio.

 

If you are a beginner, it is good to put tight stops. If you need to put tight stops, you have make entries that allows you tight stops. In a sense, looking for tight stop entries could refine your entry strategies.

 

Tight stop could be found in some entries, where the risk could be less than 1%

 

Happy Trading

Gokul

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You entry dictates your risk.

 

Can you elaborate on this? I don't understand how your entry dictates your risk? I thought that your stop does?

If you are a beginner, it is good to put tight stops. If you need to put tight stops, you have make entries that allows you tight stops. In a sense, looking for tight stop entries could refine your entry strategies.

 

I don't agree with this. Your stops should be placed at the correct place regardless if you are new or not. If you determine that an optimal stop is 10% below your entry price, this makes no sense to place the stop 5% below your entry price, just because you are new. This is much better to trade a smaller size with a 10% stop with a lower probability to get stopped out than a larger size with a 5% stop with a good chance to get stopped out by normal market fluctuation.

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When you say 'intraday' trading, what do you mean? 30 minute charts with 1-2 trades per day or 30 second charts taking 10 trades per hour?

 

The reason I ask is that if you are taking 1-2 trades per day, then I think you can and will have to give your trade more room to work, which means a bigger stop. If you take 10 trades per hour, you better keep the stops reasonable or you will blow your account in no time.

 

In general a 1-2% is what you will read, esp in books; but that is pretty arbitrary. Are we talking about a $5000 account or $500,000?

 

I hate to say it, but the answer IMO is "it depends".

 

This reminds me of a parallel w/ poker playing - when you ask someone how they play AA, the real answer is "it depends". Just asking - how to I play the rockets and providing no other info doesn't cut it. Same here, just asking how much to risk per trade doesn't cut it.

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Hey, thanks for replying. I can appreciate its a very subjective question.

 

The basis for the question was attempting to calculate the number of contracts i can trade given, 1) trading funds, 2) an number of points for average maxiumum loss*, and 3) a good percentage risk per trade for intraday trading.

 

No of CFD index contracts = (trading funds adjusted for currencies * good risk percentage) / average max loss,

 

given that cfd index contracts move in $1 local currency per point, which would result in that max loss value not (often) being greater than that suggested percentage of trading funds.

 

Will take the 1-2% from general wizdom, thanks. I like being conservative so was thinking 1/2 a percent to limit that risk, but my skills are getting better, 1% doesnt sound bad.

 

Will keep in mind trying to quanitfy my edge based on performance. Not sure if id adjust my trading amount based on that metric though.

 

*or better, from an idea of whats the maximum distance i can get out in when the trade is incorrect. Using european indices and my current trading style, 10 points is a safe average maximum. My trading strategy (and the behavior of the ftse and dax) usually let me get out at a much smaller loss, but 10 points would be an absolute 'youre wrong'. And i generally (try to :)) avoid getting in near market open. I use minute bars and trade as often as there are price patterns which could lead to a profitable transaction.

 

Just in case, im currently using a practice account with 5k US. Improvement in technique has been good. Recently got to 5 consecutive days profit. No not using real money yet :) When i do use real money, balance trading balance will be about the same.

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StockMarcus - I cant add much more than the others except to say that make sure you are comfortable from a risk loving/averse point of view with whatever system/method for position sizing you adopt......otherwise you will not stick to it (when losses occur), and you will find it harder to grow your contracts as you grow your account size.

 

good luck

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