How to improve my risk management for daytrading.

[Sekiyo]

More details on Kelly Criterion https://en.wikipedia.org/wiki/Kelly_criterion

I must confess, the criterion is a little more than i can take in and utilize, but certainly interesting. I'm told of one trader who swears by Kelly Criterion, enjoys 87% win rate and claims $100k per week average profit.

The hardest part with the Kelly criterion is gettin' the numbers right.
There are many wizards that do use this criterion for bet sizing.
We're told to bet half of it because for safety reason.
It's better to under bet than to over bet ^^

In the end it does just maximize growth over time.
If you don't know how to use it then bet a fixed %
Less than 2.5% is a good one to bet with.

 

[cornerstone]

I realize I've really poor risk management on position sizing. With $1000 I would trade $1000 or up to 2.5x margin. I take a small % loss but it feels like a big one.

What would be the ideal size to daytrade with around $2000 account next time?

Does this sound viable?

-Risk no more than 1/4th.
-Max 5% Stop Loss
-Extended hours 1/5th (Due to volatility and lack of stop loss.)

I will adjust these numbers depending on my account value. For example, with $10,000 I will probably only trade $1500 max on a single trade.

to risk 5% of the account is a good way to start (I'm guessing you new in trading because the size of the account), it's important to put good stops according to this amount. what works for me is to put stops after a high liquidity level and I use Bookmap software for that. this cuts the range of my stops to a minimum and I can control better at my risk plan.

 

[GotherL]

(I'm guessing you new in trading because the size of the account)

I am definitely not new to trading just doing it in small amounts due to having no job or any success growing it. Those small but painful losses over the years has just made me realize I need to implement a risk management strategy. (I don't think many new traders think about that stuff until they bust their account at least half a dozen times.)

 

[murray t turtle]

Yes, but I am trading low float stocks not something like forex where that 1% actually makes sense. If I put a stop loss at 1% on stocks 9/10 times it will probably just stop me out.

%% Exactly;
1% is noise, for swing/position. Some low volume or float stock gap 1% intraday LOL-LOL IBD founder has a good goal/.guideline ; risk 7 or 8% to make 24%.Best way to daytrade, some times,, = risk part of your investment profits................................

 

[ironchef]

More details on Kelly Criterion https://en.wikipedia.org/wiki/Kelly_criterion

I must confess, the criterion is a little more than i can take in and utilize, but certainly interesting. I'm told of one trader who swears by Kelly Criterion, enjoys 87% win rate and claims $100k per week average profit.

Kelly has nothing to do with improving win rate, it is all about bet size and to avoid/minimize risk of ruin.

 

[ironchef]

The hardest part with the Kelly criterion is gettin' the numbers right.
There are many wizards that do use this criterion for bet sizing.
We're told to bet half of it because for safety reason.
It's better to under bet than to over bet ^^

In the end it does just maximize growth over time.
If you don't know how to use it then bet a fixed %
Less than 2.5% is a good one to bet with.

IMHO, first thing first. You first have to find your expectancy. Once you have that, Kelly is simple. If your expectancy is negative, Kelly won't help you. You go broke slower.

 

[cornerstone]

I am definitely not new to trading just doing it in small amounts due to having no job or any success growing it. Those small but painful losses over the years has just made me realize I need to implement a risk management strategy. (I don't think many new traders think about that stuff until they bust their account at least half a dozen times.)

unless those lucky ones who find a good teacher

 

[murray t turtle]

I am definitely not new to trading just doing it in small amounts due to having no job or any success growing it. Those small but painful losses over the years has just made me realize I need to implement a risk management strategy. (I don't think many new traders think about that stuff until they bust their account at least half a dozen times.)

%%
NOT just risk management, maybe you can figure out/profit with what a bull market is??;
Better have more in a business plan than simply control risk/losses. AND you want the truth or a polite answer.?? [1]Once should be enough to blowup or grind down an account; it means WE WERE TRADING WAY TO BIG. [EVEN a super percent like 88%, JAN Stock Traders Almanac forcaster, can go like 1987, or 2009.And 88% can be wrong for years in a row;another reason to trade /invest reasonable size...………………………………………………………………………………………...
Hope this helps; it helped me a lot.

 

[Sekiyo]

1. Exploit a bias. Trade Positive expectancy situations.
2. Bet optimally to avoid ruins. Max expected log of growth.

Risk is 1. Not having a well defined strategy
Risk is 2. Trading the odds against you
Risk is 3. Over betting

If you can’t beat the odds : Broke
If you don’t master your craft : Broke
If you bet more than optimally : Broke

 

[murray t turtle]

I realize I've really poor risk management on position sizing. With $1000 I would trade $1000 or up to 2.5x margin. I take a small % loss but it feels like a big one.

What would be the ideal size to daytrade with around $2000 account next time?
Does this sound viable?

%%
Ever wonder why they want you to have more/more>> than $25 k to daytrade,GotherL?? And that IS why you cant go by your feelings, no loss on $1,000 is a big one , false feelings .
Most anyone hates to lose even a penny, but my feelings tend to try to get me out of trend WAAAAAAAAY to early.
Most making millions /billions in the market, are market makers+ investors. Maybe Don Bright Day Trading Co could help.
Hope this helps; it helps me...………………………………………………………………………………………….