3% rule only applies...

G

GotherL

I find it hysterical when investing idiots on youtube go to someone's daytrading channel and tell them that they're risking too much of their capital. Shouldn't this rule only apply to investors & preferably with around 6 figures or more? This trader only had 2k in his account trades maybe 5-10 times a day. The commission he pays wouldn't make much sense to trade anything below 25% than say 3% or 1%.

Original youtube comment :
I still think that your position sizing is too aggressive. even if you define your risk before you entry the trade you should not risk more than 3% of your capitan in a single trade in fact Tom basso just risk 1% of his capital. I am pretty sure that if you are trading with more risk than what you should take you will get emotional easily. on top of that you should figure out what kind of fear did you feel on the trade. were you afraid of losing money? were you afraid of been wrong? were you afraid of missing out the opportunity? I know that you may think that you already know about trading but if i were you i would try to check out Mark douglas' How to think like a professional trader.
 
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If you go 25%, you might as well say goodbye to your $2k. That’s way too small to trade with anyhow. You’d have to trade spy and hold it for periods of longer than a day. I wouldn’t go over 3%. I even have trick myself to stay below 2% (i compound monthly, and sandbag it)
 
GotherL said:
Don't see much of a difference. Capital=the amount of money available to trade in his account. Which was $2000.
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I don't agree. I have multiple accounts and when I trade, I trade the total size I want to risk based on my TOTAL capital, not just the amount in one account. The guy who chastised the youtube guy has no idea of what his circumstance is.
 
A friend of mine took 2K and turned it into 20K in 6 months by going all in. He did it to demonstrate how he trades and he had the 2K to lose.This was not even 1% of his total trading capital, just one account among others.

I never assume what another person's situation is.
 
Since a lot of ETers are bound and determined to tell others how to trade, what to trade, and when to trade, here is an option -

Petition the government to limit the trade size of EVERYONE to 3% of an account, no matter how much money they have. Also petition the SEC to not allow accounts under $25,000.

Then you wouldn't have to worry so much about what others do with their money.
 
cafeole said:
I don't agree. I have multiple accounts and when I trade, I trade the total size I want to risk based on my TOTAL capital, not just the amount in one account. The guy who chastised the youtube guy has no idea of what his circumstance is.
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Thanks for pointing out the difference but I fail to see how it's different in this case. The commentator couldn't possibly know if this daytrader had capital elsewhere. So he can only be referring to the capital he had in his account from his trading video he was watching at the time.
 
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GotherL said:
Thanks for pointing out the difference but I fail to see how it's different in this case. The commentator couldn't possibly know if this daytrader had capital elsewhere so he can only be referring to the capital he had in his trading video he watched at the time.
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Actually that is my point. The commentator has no information on why he trades as he does. If he has a lot more capital elsewhere he might be comfortable trading larger sizes in his small account. The commentator is making huge assumptions when he tells him to risk less. He may not be risking much at all based his overall capital. That is why I pointed out that my friend actually traded 100% of his account and risked very little overall just to make a point.
 
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