Intraday trading and Percent-Risk Position Sizing

cool, sounds like you are around .5% then on average, so similar to what i am thinking about doing.




with regard to averaging down, i've been doing that extensively over the last couple of months and I've been making a killing. I'm up over 50% on the year and nearly 75% from trough in mid-December.


It is, however, stomach churning.


I've been using 2% per trade, with averaging down, and it can get pretty hairy.


I'm going to put some stricter limits on now, .5% per trade and 3% per day. I will keep averaging for now until i see some reason not to, but will observe these limits.

Mind you, i only tend to average into trades if the trend is majorly extended (for example, if CL is +/- 3% for the day already, i'll average down looking for the retracement)


Anyway, thanks for the info...
 
I'm an intraday automated equities trader and my risk size is a max of .25%. This includes commissions and estimated slippage.

If it's a very busy day and my system is putting on a lot of positions, it starts to decrease my risk size (until I run out of intra-day buying power). Today (as an example), I ran out of buying power and actually missed 13 positions. I was (however) able to take on 27 positions today. My average number of positions (per day) is around 13.

This is trading with an account size of around $220K, so each position's max risk size is around $550 per.

Jason
 
Quote from HuggieBear:

with regard to averaging down, i've been doing that extensively over the last couple of months and I've been making a killing. I'm up over 50% on the year and nearly 75% from trough in mid-December.

It is, however, stomach churning.

I've been using 2% per trade, with averaging down, and it can get pretty hairy.
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Yes, in sim I've been averaging down at extremes (3rd pushes into a strong channel line overshoot) and usually only have 2 entries before the retracement quickly brings on profitability, but you're right the ones where you just put on the the 4th round and you just DON'T want to see it hit that disaster stop.

I can see how you're up so much, though. In sim doing this strategy I had only two losers over a period of many months. Sim isn't my living on the line though. When my account's bigger, I'll consider doing it live.
 
Quote from HuggieBear:

Thanks for the feedback. I use 2% swing trading almost exclusively.


The thing about using it daytrading is that it wouldn't be horribly unusual to lose 5 day trades in a row. Not saying it happens frequently but it's also not a rare event.


I mean, with a 2% risk on an intraday basis, you are going to end up with 5%-10% drawdowns on a pretty frequent basis, thats just the reality. I suppose it should work out fine given the probabilities involved, but that seems somewhat risky.


Anyway, if anyone is actually using this model intraday over a long term, i'd be interested to hear your approach/risk percent.


thanks
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rather than picking an arbitrary amount, and since each trader is different, it makes more sense to put a large representative sample of yourown past real trades into a spreadsheet, and backtest, seeing how different "%risks" would have affected your performance.
 
Quote from HuggieBear:

wow

that seems awfully conservative. you could lose net-20 trades in a given day and only be down 2%.
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What the wow for? He understands risk managment and you do not, this is the wow.

For a serious day trader who does about 10 squares a day, with 2% risk there is a small probability for a 20% loss, call it a black swan oir whatever. If it happens to you and you are professional you are out of the job. If you are private it will be a blow to your account. If it happens partially again you are out of business.

WoW, does it sound familiar to you?
 
Quote from sappjason:

I'm an intraday automated equities trader and my risk size is a max of .25%. This includes commissions and estimated slippage.

If it's a very busy day and my system is putting on a lot of positions, it starts to decrease my risk size (until I run out of intra-day buying power). Today (as an example), I ran out of buying power and actually missed 13 positions. I was (however) able to take on 27 positions today. My average number of positions (per day) is around 13.

This is trading with an account size of around $220K, so each position's max risk size is around $550 per.

Jason
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Thanks...that was very helpful.
 
TZ, you have a good point...I'm in the process of doing just that...will be interesting to see what my historical data suggests.




Ron, thanks for your feedback. I never said 2% was the proper risk amount on an intraday basis. In fact, the purpose of this thread was that I was feeling it was inherently too risky.


That said, I stand by my statement that .1% seems a little overly cautious and possibly inefficient to me.


Lets just use a for example:

- Assume i'm trading CL with $250k account size
- .1% risk means I can trade one contract with a .25 cent stop

or

- i can trade one ES contract with a 4-5 point stop, or maybe two contracts with a much tighter stop




In any case, I would suggest those position sizes are undersized for these two contracts on an intraday basis with $250k in your account. You would probably be better off just putting your cash in an index fund for the year.


Now, maybe his approach is quite different in that he's opening 100's of positions with a .1% size, and scalping small share price movements (ala lescor). In that case, maybe it makes more sense.


But for me, trading a 2 or maybe 3 different instruments, I don't think it does.
 
Quote from HuggieBear:

TZ, you have a good point...I'm in the process of doing just that...will be interesting to see what my historical data suggests.

FWIW, doing this can also be used to the opposite, to see if there are good profit objectives (PO) for your system. If 1+ POs test to maintain or improve your profits, they have two advantages: 1) you are in the market less time, reducing risk 2) POs are limit orders, so you will generally get POSITIVE slippage. This requires knowing the HIGHEST profit during each trade and should also be done as %, not in $ amounts.


That said, I stand by my statement that .1% seems a little overly cautious and possibly inefficient to me.

I agree with the 0.1%. Tiny stops cause a lot more losses. Each trade has a cost of bid/ask diff, commission, slippage, possible errors, etc. a good stoploss is neither too small nor large, but based on the system itself and no good money management.

On the other hand, small accounts need to take larger risks than large accounts.
 
The percent risk process revolves around the question “How fast will you allow your account to be depleted in the worst case with your style of trading?” This means based on the rate you generate trades what is the maximum amount of pain you can accept in your accounting period. For a day trader the accounting period is probably each day. For me the swing trader I use either a week or month depending on my rate of trading.

To get to my own money management rules I often work in reverse. I set a max drawdown of 6% for a month for swing trade losses with slower systems. Recently I looked at a slow swing trading system that trades 4 trades a month. That means the most I can take on in is a position size per trade of about 1.5%. Then I run that through testing. I find average loses are 1.8% because volatility is higher. So the position size is kicked lower to 1.18% to compensate for the volatility. This is the kind tweaking process I built into the process to get the system in line with my accounting period before live trading. If it does not match at the first weekly performance review it gets tweaked again until I get it right.
 
Quote from TraderZones:

I agree with the 0.1%. Tiny stops cause a lot more losses. [/B] [/B]
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Here is a guy with thousands of posts who still does not understand the difference between percent risk and stop.

He must be educated about the basics of trading. I will start for free. You can have a stop of 5%, for example, and still risk 0.1 percent of your capital. It all depends on how much money you have in the account.
 
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