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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.
I agree but why do you have to limit position size to 15% of capital if you have already set the max loss at 2%?
Ron
The reason is overnight risk and/or general single instrument risk. Bad news in a stock can easily cut the value in 1/2 without you being able to get out (example NYSE halts, acct fraud, product recalls, litigation etc.). So, in a situation like that you don't want to have all your capital in a single issue. With 15% exposure, a sudden 50% drop in price "only" sets you back 7.5% on your account instead of 50% on your 100K account.
-eLindy
-eLindy
Quote from ronblack:
I agree but why do you have to limit position size to 15% of capital if you have already set the max loss at 2%?
Ron
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???
Quote from ronblack:
I agree but why do you have to limit position size to 15% of capital if you have already set the max loss at 2%?
Ron
Because your talking about RISK managment, and even though you think you have set your max risk to 2%, that's a nice idea but not always true. Anything could happen, maybe the accountant has been robbing them blind and suddenly you find the stock halted, when it opens its going to be down 50%. If you trade long enough it will probably happen to you.
Quote from Brandonf:
Because your talking about RISK managment, and even though you think you have set your max risk to 2%, that's a nice idea but not always true. Anything could happen, maybe the accountant has been robbing them blind and suddenly you find the stock halted, when it opens its going to be down 50%. If you trade long enough it will probably happen to you.
Exactly.
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???
sorry to be rude, can anyone answer this?
thanks.