How much should you risk?

[kut2k2]

I got 50% just looking at the first two moments, and 75% looking at all of them. Which feels wrong. So I've probably made a mistake

GAT

75% I got just by setting it up in excel to optimise the expected log utility (weighted log of each outcome). That should account for all the moments. 50% I did just looking at the mean and standard deviation, and using the normal formula for that.

GAT

For the first two moments, I got radically different results.

S1 = 0.0575 ;
S2 = 0.043045 ;

k1 == s1/s2 = 1.33581136

If we use the alternative mean/variance form, the ratio is even bigger:

k1 ≈ s1/(s2 - s1^2) = 1.44695

I don't see how you got 50%.

 

[Newc2]

Sorry for a noob question. But can somebody point me in the right direction of portfolio allocation for my risk per trade. Is there some software, spreadsheet or book that can help me figure this out? I am fully invested but don't know how to weight my holdings. Thanks

 

[radex78]

Maybe different trader they have own risk management in trades, I am ever reading some suggestion from expert trader which already have long years experience is risk management betetr low risk 2% in good risk management already, but most trader might they have desred to making huge profit and trade with high risk taker

 

[Xela]

Is there some software, spreadsheet or book that can help me figure this out?

Yes - the second half of Van Tharp's beginners' book, Trade Your Way to Financial Freedom, will be very helpful to you. (If you look around online, you can probably find a free PDF copy of it, to download).

 

[radex78]

Yes - the second half of Van Tharp's beginners' book, Trade Your Way to Financial Freedom, will be very helpful to you. (If you look around online, you can probably find a free PDF copy of it, to download).

Seems very interested ebook for learning, from the title it very attract many people to reading book, and might it will giving motivation for trader beginner learning forex trading tro get financial freedom, who not want to get financial freedom I thik all people they want

 

[bublu]

I think the risk per trade should not be more than 1 - 2 % of the capital, it is good to have a right approach for managing associated risks in order to earn consistent money in long run.

 

[Visaria]

I think the risk per trade should not be more than 1 - 2 % of the capital,.

Really? Explain.

I'm risking 15% on a trade atm.

 

[globalarbtrader]

Really? Explain.

I'm risking 15% on a trade atm.

Is that your only position right now? How long do you expect to hold it for?

GAT

 

[Visaria]

I expect to hold it for weeks.

I will put on other trades.

 

[globalarbtrader]

I expect to hold it for weeks.

I will put on other trades.

Have you put 15% of your cash in, or is this the amount at risk? If the former, how much do you actually have at risk if the trade goes wrong?

To be clear, suppose I had $10,000. I could use 15%, or $1,500 to buy GOOG. But I put a stop loss at 20% of the current price. So all I really have at risk is $1,500 * 20% = $750 or 15% * 20% = 3% of my portfolio (in reality it's probably more than that as prices gap overnight and jump intraday so I might not get filled exactly at my stop).

GAT