Money Management Rules Day Trading

H

Howard

Hi all,

What kind of rules do you utilize for your day trading operations?

How much do you risk per each trade?

Do you have a maximum daily drawdown rule?

A maximum number of losses in a row?

Also of interest - do you stop trading if you're up a certain amount for the day?

Thanks in advance.
 
I think it all depends on your trading psychology, if you copy pest another persons strategy it might fail for you. The amount that I am willing to lose is a factor of my risk appetite. Personally I can't risk more than 2% of my entire portfolio, and my risk to reward ratio I set it at minimum ratio of 1:2.
 
I risk slightly more than 2 %. I want to reduce this number eventually.

I stop trading for the day if I take 3 full stops in a row. This would be 9 points per ES contract. My maximum drawdown per day is the same. This rarely happens.

I can also add that on the event that I'm wrong on a trade, I don't typically take a full stop. The stop is there for protection. If I perceive the trade to be wrong after entry, I get out as soon as I can or at the most possible favourable price. Not always easy to do, but it's become more and more of a habit. It's stupid to just wait for a stop to get hit.

If I'm up more than 10,0 ES points per day, I reduce my size to one lots. This is not ideal, but to be honest, there's been a time too many where I've been up greatly on the day and lost much of it later in the day. Ideally, I can trade the entire session from start to end, but now I'm doing it on reduced size after reaching a certain target.

The result of this is that if I'm up say 10 points per contract on a total of 5 contracts, I would need to lose 50 points in order to break even on the day. Excluding commissions for simplicity. The upside is that I can stay in the game and keep practicing.

Thoughts? Comments?
 
Howard said:
...

The result of this is that if I'm up say 10 points per contract on a total of 5 contracts, I would need to lose 50 points in order to break even on the day. Excluding commissions for simplicity. The upside is that I can stay in the game and keep practicing.

Thoughts? Comments?
More...

Conversely, what if you are down, say, 10 points per contract on a total of 5 contracts? You would need to gain 50 points to break even for the day, excluding commissions for simplicity.

The downside of that is you are out of the game. Period.

Thoughts? Comments?
 
Howard said:
Hi all,

What kind of rules do you utilize for your day trading operations?

How much do you risk per each trade?

Do you have a maximum daily drawdown rule?

A maximum number of losses in a row?

Also of interest - do you stop trading if you're up a certain amount for the day?

Thanks in advance.
More...

You asked about day trading...

How much do you risk per each trade?
I use a hard catastrophic stop (my term) on all trades, in the event I pass out at my desk, hardware failure, exchange outage, or any number of things that I can not control. With that in mind, I use a structure-based mental stop... the place/price at which I believe the trade is negated BASED ON THE STRATEGY BEING EMPLOYED. There is A LOT of air between the two, catastrophic is not intended or expected to be an exit under "normal, accessible, and capable" conditions.

Do you have a maximum daily drawdown rule?
Maximum DAILY drawdown, NO. Maximum DAILY (realized)loss, YES. I have my structure-based stop that negates the trade. Im out, looking for next. My DAILY max loss is $1200 trading my normal size.

A maximum number of losses in a row?
NO. Max daily loss applies.

do you stop trading if you're up a certain amount for the day?
NO. However time of day has influence such as the last 45 minutes of regular trade hours.

HTH
 
Overnight said:
Conversely, what if you are down, say, 10 points per contract on a total of 5 contracts? You would need to gain 50 points to break even for the day, excluding commissions for simplicity.

The downside of that is you are out of the game. Period.

Thoughts? Comments?
More...

My maximum daily drawdown is three full stops in a row which equals 9 points/contract. At that point I'm done for the day. It's rare that this happens.
 
Good comments. Thanks.

tiddlywinks said:
My DAILY max loss is $1200 trading my normal size.
More...

What is your account size then?

Would it be more appropriate to have daily max loss per contract? Unless the goal is to continue decreasing risk as the account grows?

I consider this stuff on a per contract basis instead, but not sure if that's the right or wrong way. But it's what I currently do.
 
qlai said:
What exactly does this mean?
More...

To my eyes it is obvious...

"Maximum DAILY drawdown, NO. Maximum DAILY (realized)loss, YES."

It means he does not have a daily drawdown. But he has a daily realized loss limit.

The key is that word "drawdown". Methinks different people define that term differently. I know I do.
 
You must log in or register to reply here.
Back
Top