you dont have to risk 2%. If you can deposit money fast in your trading account you can risk 20%. you can have 90% of the money in your trading account in a savings account if you can deposit in 1 day. risk of ruin is nothing than a (nonproductive) cushion.
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2% rule revisted
- Thread starter jbob
- Start date
Quote from college_trad3r:
you dont have to risk 2%. If you can deposit money fast in your trading account you can risk 20%. you can have 90% of the money in your trading account in a savings account if you can deposit in 1 day. risk of ruin is nothing than a (nonproductive) cushion.
2% doesn't refer to the funds in your trading account at the time. It refers to your total trading capital. Doesn't matter whether it's in your trading account, savings account or stuffed into your mattress.
Quote from ScoobyStoo:
Joe
Could you please explain what you mean when you say that your setups are binomial.
Thanks
Let me apologize in advance if this comes down to semantics. I don't always use the right terms as I comingle them from my "gambling" background but here is what I mean:
As an example, I do option spreads where my stats (inclusive of commissions) are as follows:
Win 2/3 @ 1.40 avg
Lose 1/3 @ 2.40 avg
So for every three trades I avg a .40 gain for every $7.20 risked. This win % return/risk calculates to approx 9.35% Kelly. I use half of that as my size based on the reasons in my previous post.
I use a few different strategies and each has their own %'s.
Frankly, this is very similar to how I approach my live sportsbetting. I use the same concept for both.
Joe.
Joe
Obviously buying options offers absolute limitations to risk but be aware of the assumptions made by the Kelly derivation. If half Kelly works for you then great, but it only takes one black swan to wipe an average account out.
All the best
Obviously buying options offers absolute limitations to risk but be aware of the assumptions made by the Kelly derivation. If half Kelly works for you then great, but it only takes one black swan to wipe an average account out.
All the best
now this is where i disagree with some- so day one i would start off using about 3%-5% of my margin account for my daily value at risk. but as soon as i make profits of say 20% on my account over a few lucky days, now i view that 20% as my "gambling roll" and try to run with it- if you can have 3 good months in a row then stop continuing to level up, but start taking out withdrawals, then 1 mo's pay should easily be several initial deposits, so if you ever do bust, just go back to the beginning and start over. i'm currently starting month 4- a very key one for me on this run, and i'm hoping to just maintain my current size, but get paid for the next few months. btw if you don't view it as a completely losable "gambling roll" this won't work, and currently i'm gambling with 15% of my roll / day, but had 100% return in june, 60% july and 150% augusts.
Kelly is a plain killer.
for ES, here's what I do:
75k account. risk maximum of 2% on any one trade, so this means I can trade a maximum of 10 contracts (but i typically trade 7) with a max 3 point stop; my stop level is based on S/R, so my entry can never be more then 3 points away from my stop level. if the entry doesn't line up to give me a 3 point or less stop level, then i don't take the entry. under certain conditions i use a maximum 4 point stop, but will carry a lighter load.
others will have their own way.
this is what works for me.
75k account. risk maximum of 2% on any one trade, so this means I can trade a maximum of 10 contracts (but i typically trade 7) with a max 3 point stop; my stop level is based on S/R, so my entry can never be more then 3 points away from my stop level. if the entry doesn't line up to give me a 3 point or less stop level, then i don't take the entry. under certain conditions i use a maximum 4 point stop, but will carry a lighter load.
others will have their own way.
this is what works for me.