I selected option "Others". The size of the position is based on the level of conviction and on how risky the investment is (i.e. volatility of daily returns).
Percent of your total portfolio that you risk on each trade?
- Thread starter vincentnyc
- Start date
Yes why not ? If use 1% you average 3 wins and 2 losses a week at 1:1 RR you net around 1%/week. Compounds to around 70% a year. Use 2% or trade with better R:R and you have triple digit returns. I hope that is "much money" for you on a $100k account.
In my youth, I didn't use the standards of no more than 2% at risk trading commodities and one of many reasons I failed and blew through many accounts. After several years of being dumb, I learned about hedging, and my risk on a trade are often positive, meaning if the underlying loses, the options will actually make more than my losses, so the systems I have designed are seeking the "whales"/huge profitable outcomes. I am often asked what is my on trades greater than 30 minutes my reward to risk, since I am trying the have enough on the hedges to be at a minimum be profitable on a lose, impossible to say. But even with positive risk, at times I do have losses as I often keep hedges little longer than getting out of the underlying, so in essence I have designed 2 systems, one for the underlying and one for the hedge.
What most traders usually say "But if you are a hedge fund manager that has millions or billions to trade, that is a different story, but I'm not a hedge fund manager nor have millions dollar trading account", this statement makes it shown to me you not ready to trade, fund managers have trading much harder as it almost impossible to hedge on many positions if they are hedging at all, whereas you having much less of an account, it is far easier to hedge and have close to zero risk.
And on profitable trades I do lose on the hedges if underlying don't produce enough, but since I seek patterns that normally have strong moves, this is where my only risk is.
And so where most day traders say risk is smallest for them doing intra day trading, it is far the greatest risk for me as it is impractical to hedge as I am often in trades for short durations of time. But the risk values for me in greater than 30 minute bars is ave less than twenty cents of 1%.
How much to risk? How much should/must you risk?
In part those are logistic questions.
Bill O'Neill, legendary financial guy... advised, "risking no more than 8% on a stock play". If you go along with that and you have a portfolio, you're working with the logistics of managing all of your positions.
Today, you can trade large ETFs and stock index futures with a much tighter stop if you choose. Personally, I risk <0.5% of my trading capital on any one play.
How can I "risk so little" you ask? By making reasonable, low-risk, high-probability of success, strategic entries via Price Chart TA.
In part those are logistic questions.
Bill O'Neill, legendary financial guy... advised, "risking no more than 8% on a stock play". If you go along with that and you have a portfolio, you're working with the logistics of managing all of your positions.
Today, you can trade large ETFs and stock index futures with a much tighter stop if you choose. Personally, I risk <0.5% of my trading capital on any one play.
How can I "risk so little" you ask? By making reasonable, low-risk, high-probability of success, strategic entries via Price Chart TA.
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The amount to risk on each trade depends on:
If your expected return is negative then zero - you shouldn't trade.
If your percentage expectancy (W:L ratio) is 60% - you must survive a 16 losers in a row as an example.
The question is part of a complex area called money management and is not correctly answered with a simple percentage - one size fits all - answer.
- Your percentage expectancy
- Your expected return for your system(s)
- The correct stop for your setup and what instrument you are trading (its volatility over the trade time period)
If your expected return is negative then zero - you shouldn't trade.
If your percentage expectancy (W:L ratio) is 60% - you must survive a 16 losers in a row as an example.
The question is part of a complex area called money management and is not correctly answered with a simple percentage - one size fits all - answer.
I do stat arb with 20-30 open positions pretty much at all times, each trade both long & short use around 5%. My vol is extremely low so I'll probably lever up soon.