Ideal position size for best risk/reward ratio

I suspect most just bleed and bleed and bleed until they lose control...

Or you have people like Niederhoffer who simply do not have a healthy respect for her...
 
I'm not part of the one's getting wiped out. I don't feel bad for the losers. They're getting what they want. I was interested in specific reasons why people go bust knowing the way no to go bust. To me I think it's mostly psychological. Some other comments!!

trend456
 
Originally posted by LiquidSwords


Bigscalp,

You are missing the point... He bases his ISP (initial stop placement) or risk on volatility, which is in turn determining position size.

Pabst,

What is your point about the 9/11 out of curiosity???
More...

Well that opening on 9/18 sure made that 1-2% stop on swing trades look vulnerable.
 
Yeah, we were long going into 9/11 last year and obviously lost more than 1 - 2 % on my swing trades. Not much we could do about it other than sell into the first bounce when the market reopened and chip away at making the losses back over the next several months. That's just trading, but we certainly learned a new appreciation for risk management after that happened. Always expect the unexpected to happen quickly became our new motto!
 
Appreciate your feedback. Yes, the information I presented may be a bit elementary to some traders, but I'm amazed at how many traders fail to have even a simple position size management system that works effectively. I hope that you are correct that most traders already have a system for doing so, but in my experiences in working with other traders, I have found most of them do not.

My purpose in attaching the Excel calculator was simply to help a few beginning traders out if they are looking for a simple and solid way to determine position size. If the material is too basic, then you may just want to ignore this thread. But, I have found the most basic principles and risk-management systems to be the most effective for me personally.
 
For what it's worth, many of the best traders I know have wiped out at one point or another. In fact, it is my opinion that any trader who has NOT had a significant drawdown is either a new trader or a liar. However, what determines one's long-term success is how he/she recovers from that drawdown and whether or not he/she applies the lessons that were learned from it. So, I really don't think wiping out is a bad thing if a trader learns from it and becomes stronger as a result (although most never come back). Just my 2 cents. . .
 
I'm sure there are exception because some people already knew about the subject of position sizing and all the materials popular now before the general public had an idea. I already knew this topic way before it was out in the books out in bookstores. But I also agree with you because it's certainly a topic discussed lately and never discussed in the public in the bull markets. A lot of them still don't understand them yet. Position sizing wasn't popular back then. I thought it was fun knowing what people didn't know. People should thank Van Tharp.

Trend456
 
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