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100K Account Risk/Reward
- Thread starter ligerny
- Start date
Quote from condorll:
For 100k in my experience and opinion:
Max loss 2% of capital per trade.
Position size max 15% of capital.
Average profit runs around 10%, range 8-15%
Must have 2.5 to 1 (minimum) reward/risk ratio.
How did you come up with these #s? Would you go over 15% max capital if the risk/reward looks very very good in your favor?
Quote from turkeyneck:
How did you come up with these #s? Would you go over 15% max capital if the risk/reward looks very very good in your favor?
I developed these numbers based on my experience over the past 20-25 years. No I wouldn't go over 15%, too much risk if the CEO gets arrested for example and the stock gets chopped in half. That blows the 2% max loss right out of the water.
Those are MY rules that have enabled me to prosper over the past 2-3 decades, (and I am up about 30% this year, so far).
Your mileage may vary based on your greed.
Quote from staffpro:
for a smaller account would you tolerate greater risk or keep it the same/similar like say 50k and maybe 20k accounts. And to fulfil the 15% in one instrument requirment in the smaller accounts would you simply look at instruments that are priced lower in order to always have round lots???
Keep it the same!!!
Most who begin trading have only moderate account sizes so they believe that they have to increase risk in order to trade.
This is one of the biggest reasons why most newbies blow-up and fail miserably.
If you have to increase risk in order to trade, then you shouldn't be trading.
All IMO
Chorlton
Quote from chorlton:
Keep it the same!!!
Most who begin trading have only moderate account sizes so they believe that they have to increase risk in order to trade.
This is one of the biggest reasons why most newbies blow-up and fail miserably.
If you have to increase risk in order to trade, then you shouldn't be trading.
All IMO
Chorlton
So you suggest that the newbie wait until they save 30-50k and then start trading for the first time?
no.
the newbie should blow out a few $2500 accounts and consider it tuition. no one gets good without some major mistakes along the way.
Quote from condorll:
For 100k in my experience and opinion:
Max loss 2% of capital per trade.
Position size max 15% of capital.
Average profit runs around 10%, range 8-15%
Must have 2.5 to 1 (minimum) reward/risk ratio.
Fair enough but I assume you trade the remaining 85% in uncorellated markets, for example commodities or forex. If you trade other stocks, systemic risk cannot be diversified and you can lose multiples of 2% at once. This happened to me in 2006. I had 200K and I traded 10 lots of 20K in S&P 100 stocks. One day all 10 stocks went down and I lost about 18% of my capital. I managed to finish the year with a 7K profit trading forex.
I still think based on my experience that 2% is too high. Try 0.5% and increase the trading frequency. You need more money in the account for this to make any sense but this is the way it is.
Futures don't go down 50% during a single trading day but stocks, any stock, can do it. In forex this seldom happens. Stock position trading poses the highest risks.
Quote from akdrmeb:
So you suggest that the newbie wait until they save 30-50k and then start trading for the first time?
no.
the newbie should blow out a few $2500 accounts and consider it tuition. no one gets good without some major mistakes along the way.
I don't remember mentioning exact figures of 30-50k but yes I am suggesting they wait until they have "sufficient" funds to trade risk at an appropriate rate.
You suggestion about blowing a few $2500 accounts and considering it "tuition" does not sound logical to me.
With such a small account size each time, the only way to trade it is to increase risk which will make it extremely difficult for a newbie to survive over the long-term which is what trading is all about.
Using your example, even with a sound strategy (which would have been hopefully learnt via your "tuition process"), using too high a risk will definately put the odds of long-term survival against you which is something I personally don't agree with.