How much risk capital should one use in a single trade?

[lemarche]

Quote from Ghost of Cutten:

Depends mainly on your win rate.

High win rate (70%+) - bet 2-4%
Medium win rate (50%) - bet 1-2%
Lower win rate (30%) - bet 0.5-1%
Lottery ticket trade (e.g. 20% win rate) - bet 0.25%

1) Why would you bet when below 50%??? go to a roulette "near you" instead... (and get 49%, YAY !..)
2) You forgot to mention loss/win ratios... without which the win rate is completely meaningless...

Acrary post is the best post so far.

 

[lemarche]

Quote from Visaria:

Bill has a $100,000 account. He's gonna risk 1% ($1000). Decides to go short 4 contracts of CL at exactly $100.00. He has his stop at $100.25.

News comes out that a nuclear explosion has occurred in the Ghawar Field in Saudi Arabia. Probable terrorist attack. CL immediately hits $125 (lets forget about limit moves for the time being). Bill's stop is filled at $125.00. Bill has just been wiped out.

Discuss.

John´s house gets hit by a nuclear bomb while he was trading Gold, heavily long 1000 contracts... Now John will never get to cash the money on his brokerage account...

Discuss.

 

[toolazy]

Quote from lemarche:

John´s house gets hit by a nuclear bomb while he was trading Gold, heavily long 1000 contracts... Now John will never get to cash the money on his brokerage account...

Discuss.

pity. that perfect setup when first time in his life all his 12 indicators aligned on top of inverted HS to buy gold - he'll never enjoy fruits of his TA knowledge.

:eek:

 

[toolazy]

Quote from Visaria:

No, they are not.

I'm gonna be rude and request that you please go away.

that is plain racism against fx traders !

You think you are better human because playing oil & stock indexes.

I tell you what. I play them all. And largest wins & best R:R came from FX.

 

[FrankSlaughtery]

Quote from lemarche:

John´s house gets hit by a nuclear bomb while he was trading Gold, heavily long 1000 contracts... Now John will never get to cash the money on his brokerage account...

Discuss.

actually i've already thought of something similar to this and it's all of my monitors and the million pound stand falling over on me...

 

[Visaria]

You guys jest...but it is a serious issue.

Maybe you have to experience a black swan event to appreciate it?

 

[TrendPlayer]

3-% risk is the most I will take on 1 trade. Seeing figures like 10-20% on 1 trade is crazy. 30-40% is just idiotic.

 

[bwolinsky]

Quote from TrendPlayer:

3-% risk is the most I will take on 1 trade. Seeing figures like 10-20% on 1 trade is crazy. 30-40% is just idiotic.

10% on one to make 35+% is fine, though, right?

 

[bln]

Quote from OddTrader:How much risk capital should one use in a single trade?

Should it be 5%,10%, 25%, 50%, 75% or even 100% from the risk capital?
What do you think?

Impossible to say a generic rule as it is a factor of many different metrics together.

- Win/Loss ratio, ie. percent of winners.

- Profit/Loss ratio, winner to loser size.

- Frequency of trades. ex. a strategy that make 1000 trades in a year or one that make 10 trades in a year.

- Serial or parallel positions, a strategy that opens and closes each trade before the next or one that got 10 trades simultaneously open.

 

[goodgoing]

Quote from bln:

Impossible to say a generic rule as it is a factor of many different metrics together.

- Win/Loss ratio, ie. percent of winners.

- Profit/Loss ratio, winner to loser size.

- Frequency of trades. ex. a strategy that make 1000 trades in a year or one that make 10 trades in a year.

- Serial or parallel positions, a strategy that opens and closes each trade before the next or one that got 10 trades simultaneously open.

But still you must employ an upper limit, like 2% - 5% max regardless.