Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

asiaforexmentor

Whats Your Risk Percentage Per Trade?

Recommended Posts

I'm not as savvy as you guys but here is what I would do.

 

Based on the percentage of capitalization what % of equity on a per trade basis can you lose per day before you go out of business?

 

 

I agree 1000%. Unless that is you say I'm being too risky to use that high a number.

 

;)

Share this post


Link to post
Share on other sites
I agree 1000%. Unless that is you say I'm being too risky to use that high a number.

 

;)

 

I am just generally saying that anyone who wants to be long for this business should figure out first, based on their risk capital at what percentage loss per DAY, how many trades will they get at a fixed percentage of original starting capital... before going out of business..

 

I think that most are not adequately capitalized and are risking too much on any one opportunity.

 

My belief is in this business you should (my belief) assume the worst not "hope" for the best.

 

A new trader must anticipate the issues that will arise emotionally when initially putting $ at risk and how that will lead to random results and also sequential losses.

 

The objective of a newer trader is to survive the learning curve and this is assuming they have a viable edge that they consistently execute. Hopefully they have taken the time to SIM trade and have done the necessary work to recognize an edge and can execute it consistently. Hopefully they have a trade plan - a business model so they know where they are going and what it will cost to get there. (Losses are cost of production) If you can't manage your overhead you are going out of business.

 

This is a business first of survival. The $ will come if you stay in business.

 

Another issue is the psychological impact of strings of losses and when the percentage of capital at risk is excessive this has an exponential negative impact which can lead to a downward emotional and financial spiral for the trader wannabee. Trader wannabee is anyone who is not consistently profitable - no matter how long they've been at it.

 

If anyone wants to see what this is about, pick your starting equity and then take a percentage of that amount and figure how many trades you get before you go out of business.

 

I keep my daily losses to around 1.25%. Not only do I protect my account but I protect my mental state since the percentage of loss does not impact me psychologically.

 

I also understand that the next trade has a 50/50 probability of being profitable. Even if I have an edge, which I do, I also know that I can have strings of losses.. Do you know where they will show up? I don't.

 

When we lose it can set off all kinds of mental issues. Revenge trading - I want to make it back.. I don't want to lose today... I'll take one more trade, then another and then all self-control is lost. A manageable lose turns into a large loss and the odds of recovery both financial and psychological go down..it is like having to try to push a huge bolder up a hill.

 

Accounts get severely damaged or blown out under those conditions.

 

I have learned this the hard way. There are just some times that I cannot get in sync and rather than do damage that is difficult to recover from, I just step back with the knowledge that there is always another bus coming by..

 

In addition, trade management is the next important item to reduce risk.. Assuming again you have a viable trade plan, trading multiple contracts allows you to quickly reduce risk by scaling out. One may think this is more risky since you can take a large hit if you are wrong before you get your first scale. It happens. On the other side, if you know where the high probability areas are where you will get your scale you can reduce or eliminate your risk on a trade. Obviously, this is not for novices but trading all in/all out imho is ludicrous and does nothing to reduce risk.

 

IMHO, this business is ALL about risk management. Most novices spend 90% of their energy on setups/entries. Regretfully, that is not the problem. It's everything else. Risk management and Profit management - the Exit. If you don't have those answers then this will be a short term hobby for most. :2c:

Share this post


Link to post
Share on other sites
I am just generally saying that anyone who wants to be long for this business should figure out first, based on their risk capital at what percentage loss per DAY, how many trades will they get at a fixed percentage of original starting capital... before going out of business..

 

I think that most are not adequately capitalized and are risking too much on any one opportunity.

 

My belief is in this business you should (my belief) assume the worst not "hope" for the best.

 

A new trader must anticipate the issues that will arise emotionally when initially putting $ at risk and how that will lead to random results and also sequential losses.

 

The objective of a newer trader is to survive the learning curve and this is assuming they have a viable edge that they consistently execute. Hopefully they have taken the time to SIM trade and have done the necessary work to recognize an edge and can execute it consistently. Hopefully they have a trade plan - a business model so they know where they are going and what it will cost to get there. (Losses are cost of production) If you can't manage your overhead you are going out of business.

 

This is a business first of survival. The $ will come if you stay in business.

..............

 

In addition, trade management is the next important item to reduce risk.. Assuming again you have a viable trade plan, trading multiple contracts allows you to quickly reduce risk by scaling out. One may think this is more risky since you can take a large hit if you are wrong before you get your first scale. It happens. On the other side, if you know where the high probability areas are where you will get your scale you can reduce or eliminate your risk on a trade. Obviously, this is not for novices but trading all in/all out imho is ludicrous and does nothing to reduce risk.

 

IMHO, this business is ALL about risk management. Most novices spend 90% of their energy on setups/entries. Regretfully, that is not the problem. It's everything else. Risk management and Profit management - the Exit. If you don't have those answers then this will be a short term hobby for most. :2c:

 

Sometimes you have to lose it all before you can fully grasp with experience how the market works. I'm not saying it must be this way for everyone, but Scott Shuburt asked a question in one of his videos: "How many times are you prepared to lose your account equity as tuition of grasping the fundamentals of how the market works?"

Share this post


Link to post
Share on other sites

 

I keep my daily losses to around 1.25%. Not only do I protect my account but I protect my mental state since the percentage of loss does not impact me psychologically.

 

 

I don't intentionally attempt to keep my losing days to no more than 1.5%-2.5%, but it sort of just happens that way when I daytrade because of the way I cut losses. I generally do not look at my losses or gains while I am trading, though I am completely conscious of whether I am up or down. If I have a a string of large winners, I will want to take larger trades, so I will use the gains as leverage and, therefore, need to do some math.

 

Small losers is absolutely the prescription for maintaining a healthy mental state. I am not going to lie; a string of losers certainly pisses me off, but fear or doubt or other ills doesn't enter the picture.

 

I am not about to try to work on learning how to not get pissed off. I have worked a lifetime at learning how to act when I am pissed off and I am not about to waste all that hard work.

Share this post


Link to post
Share on other sites
Hi BlowFish,

 

Could you expand a little on what you meant by the above please?

 

Thanks

 

BlueHorseshoe

 

Well, it's generally excepted that financial data series ('markets') do not have a normal (gaussian) distribution. Whilst there are various ideas what the actual distribution is, most (all?) agree that it is some sort of 'fat tailed' distribution. This would account for 'streaks' in systems. Both Mandelbrot & Taleb have done significant work on this (though I still haven't got round to reading Taleb).

 

Fat tails suggest additional risk due to the increased likelihood of high sigma events (black swans if ytou like).

Share this post


Link to post
Share on other sites
I don't intentionally attempt to keep my losing days to no more than 1.5%-2.5%, but it sort of just happens that way when I daytrade because of the way I cut losses. I generally do not look at my losses or gains while I am trading, though I am completely conscious of whether I am up or down. If I have a a string of large winners, I will want to take larger trades, so I will use the gains as leverage and, therefore, need to do some math.

 

Small losers is absolutely the prescription for maintaining a healthy mental state. I am not going to lie; a string of losers certainly pisses me off, but fear or doubt or other ills doesn't enter the picture.

 

I am not about to try to work on learning how to not get pissed off. I have worked a lifetime at learning how to act when I am pissed off and I am not about to waste all that hard work.

 

I know, I know..you keep a punching bag next to the desk... I keep a few extra keyboards in the closet... :helloooo:

Share this post


Link to post
Share on other sites
I am just generally saying that anyone who wants to be long for this business should figure out first, based on their risk capital at what percentage loss per DAY, ............
Yes I agree, I was kidding previously about 1000% agreement.

 

Nobody likes to think negative and to suggest to someone that they should accept their losses as part of the business of trading is heresy. To the naive that is.

 

They can strive for 90 something % winning trades.

 

Let winning trades run, cut losses short will outlast those looking for perfection.

Share this post


Link to post
Share on other sites
Well, it's generally excepted that financial data series ('markets') do not have a normal (gaussian) distribution. Whilst there are various ideas what the actual distribution is, most (all?) agree that it is some sort of 'fat tailed' distribution. This would account for 'streaks' in systems. Both Mandelbrot & Taleb have done significant work on this (though I still haven't got round to reading Taleb).

 

Fat tails suggest additional risk due to the increased likelihood of high sigma events (black swans if ytou like).

 

Thanks - I see now what you mean by 'streaky'.

 

I have read a little of Taleb, who thinks that the best way to understand pricing is through 'jump diffusion' models, which essentially result in skewed gaussian distributions with extreme kurtosis and fat tails - now there's a mouthful!

 

I've often wondered what would happen if I were to throw every single futures instrument together into one single 'synthetic' market - this new market ought to be far more random, and therefore ought to be more normally distributed. Unfortunately I wouldn't have the capital to trade it!

 

Thanks,

 

BlueHorseshoe

Share this post


Link to post
Share on other sites
Yes I agree, I was kidding previously about 1000% agreement.

 

Nobody likes to think negative and to suggest to someone that they should accept their losses as part of the business of trading is heresy. To the naive that is.

 

They can strive for 90 something % winning trades.

 

Let winning trades run, cut losses short will outlast those looking for perfection.

 

If someone has 90% winning trades I'd like to meet them.. I will write a check..this is assuming that there is a true positive expectancy net of costs, slippage, etc.

 

I have found that winning percentage is not very important..anything over 50% helps... In fact setups aren't that important relative to everything else. I will always come back to risk management since most traders focus on surgical entries, the setup, the magic indicator, seeking the special sauce..it doesn't exist...

 

The issue is what do you do with a trade once it is on... Do you wait to get stopped out if you are wrong? Does one use a fixed money stop? Why?

 

If it moves your way then retraces then what? When do you get out? dump the trade, scale out, exit a winner? These are the answers required to make it in this business.

 

Is the traders execution random? Discretion creates randomness.. does the trader keep changing things, a tweak here, a tweak there - more randomness - exponentially.

 

Most want high percentage of winning trades but that does not lead to profitability..it does however fulfill the need to be right... something that is contrary to success in this business. High probabilities come from short targets.. profitability comes from longer targets with more uncertainty...

 

Again, trade management, one of the last things traders ever think of working on, is what will separate the winners from the losers in most cases. I'm sure there are exceptions. It depends on time-frames, etc. I am referring to daytrading.

 

Trading is multi-dimensional with various components that must align. Many never get to understand that profit comes from risk and trade management potentially more than it does from entry...:2c:

Edited by roztom

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • CVNA Carvana stock, nice top of range breakout at https://stockconsultant.com/?CVNA
    • GDRX GoodRx stock, good day, watch for a bottom range breakout at https://stockconsultant.com/?GDRX
    • Date: 14th February 2025.   Can The NASDAQ Maintain Momentum at Key Resistance Level?     The price of the NASDAQ throughout the week rose more than 3.00% to bring the price back up to the instrument’s resistance level. However, while taking into consideration higher inflation, tariffs and the resistance level, could the index maintain momentum?   US Inflation Rises For a 4th Consecutive Month The US Consumer Price Index, or inflation, rose for a 4th consecutive month taking the rate even further away from the Federal Reserve’s target. Analysts were expecting the US inflation rate to remain unchanged at 2.9%. However, consumer inflation rose to 3.00%, the highest since July 2024, while Producer inflation rose to 3.5%. Higher inflation traditionally triggers lower sentiment towards the stock market as investors' risk appetite falls and they prefer the US Dollar. However, on this occasion bullish volatility rose. For this reason, some traders may be considering if the price is overbought in the short term.   Addressing these statistics, US Federal Reserve Chair Jerome Powell acknowledged that the Fed has yet to achieve its goal of curbing inflation, adding further hawkish signals regarding the monetary policy. Other members of the FOMC also share this view. Today, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated that the Fed is unlikely to implement interest rate cuts in the near future. This is due to ongoing economic uncertainty following the introduction of trade tariffs on imported goods and other policies from the Republican-led White House.   Most of the Federal Open Market Committee emphasizes additional time is needed to fully assess the situation. According to the Chicago Exchange FedWatch Tool, interest rate cuts may not start until September 2025.   What’s Driving The NASDAQ Higher? Earnings data this week has continued to support the NASDAQ. Early this morning Airbnb made public their quarterly earnings report whereby they beat both earnings per share and revenue expectations. The Earnings Per Share read 25% higher than expectations and Revenue was more than 2% higher. As a result, the stock rose more than 14%. Another company this week that made public positive earnings data is Cisco which rose by more than 2% on Thursday. Another positive factor continues to be the positive employment data. Even though the positive employment data can push back interest rate cuts, the stability in the short term continues to serve the interests of higher consumer demand. The US Unemployment Rate fell to 4.00% the lowest in 8 months. Lastly, investors are also increasing their exposure to the index due to sellers not being able to maintain control or momentum. Some economists also increase their confidence in economic growth if Trump can obtain a positive outcome from the Ukraine-Russia negotiations.   However, during Friday’s pre-US session trading, 80% of the most influential stocks are witnessing a decline. The NASDAQ itself is trading more or less unchanged. Therefore, the question again arises as to whether the NASDAQ can maintain momentum above this area.   NASDAQ - News and Technical analysis In terms of technical analysis, the NASDAQ is largely witnessing mainly bullish indications on the 2-hour chart. However, the main concern for traders is the resistance level at $21,960. On the 5-minute timeframe, the price is mainly experiencing bearish signals as the price moves below the 200-period simple moving average.   The VIX, which is largely used as a risk indicator, is currently trading 0.75% higher which indicates a lower risk appetite. In addition to this, bond yields trade 6 points higher. If both the VIX and Bond yields rise further, further pressure may be witnessed for index traders.   Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Michalis Efthymiou HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • LUNR Intuitive Machines stock watch, attempting to move higher off 18.64 support, target 26 area at https://stockconsultant.com/?LUNR
    • CNXC Concentrix stock watch, pullback to 47.16 triple support area with bullish indicators at https://stockconsultant.com/?CNXC
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.