If this is a small stake that you want to be aggressive with, I would consider 5%. If you have a string of losses, you may want to pull back to 1-3% for awhile, or paper trade and reassess.
How do you calculate best optimal MM risk % per trade?
- Thread starter BMWZ5
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First rule is: you should never be undercapitalized.
If you have not at least 5-50K you should even not start trading.
If you can only risk $1000 it can mean two things:
If you have a BMW Z5 you can easily out up more money.
But if you dream about having a BMW Z5 then you have a problem.
If you have not at least 5-50K you should even not start trading.
If you can only risk $1000 it can mean two things:
- your total worth is close to zero too. So you in fact have no money to trade.
- you are afraid to really trade and will react emotionally when losing some money.
If you have a BMW Z5 you can easily out up more money.
But if you dream about having a BMW Z5 then you have a problem.
$1,000 is more than enough of a seed capital in trading to get the ball rolling.
Sure, it's a small amount -- but it can still manage to get the fire starting.
(if you're smart and know what you're doing...if you're just gambling or shooting from the hip...then expect ruin)
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Someone with $1000 and asking for advice about MM is not exactly the profile (smart and know what you're doing) you describe, I think. I might be wrong but I have the impression the OP is not an experienced and well trained trader. That is what I based my opinion on.
When I started to trade I even wiped out a 50K account. I thought I was smart and knew what I was doing. 25 years later I am able to start with $1000, because now I know what I am doing.
The cash I lost while learning would have paid off my mortgage two-fold. Now I truly believe that if I lost it all, and if I could then just get staked enough margin to trade one ES contract with perhaps a $500 cushion against the potential for an initial 2-3 trade losing streak, I could be back on my feet very quickly. Jesse Livermore once said that "it is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance." I agree with that sentiment whole-heartedly.
Sensible money management necessarily predicates that most equity won't be being used most of the time, to put it mildly. Its "fullest potential" involves and necessitates most of it being held in reserve for bad runs/patches.
This book will help you enormously (read all of it carefully before trading with real money): Profitability and Systematic Trading - Michael Harris (Wiley, 2007).