Should amount to risk vary with trade frequency?

[helpme_please]

A standard piece of risk management advice is not to risk X% percent of your portfolio. Should X be different for day traders versus longer-term traders who hold their position for weeks to months? Should day traders have a lower X?

What is the opinion of elitetraders regarding this matter?

 

[GotherL]

Don't think so. But daytraders with a small account under 5k should have a higher risk % due to the lack of diversification and volatility. 1% for investors then at least 2.5% for daytrading is needed. No way you can get away with risking just 1% max without getting stopped out on most of your trades. Unless, your daytrading slow moving mega caps.

 

[maxinger]

just make it simple.
too complex and your brain cannot handle it.


Let's say you are day trading futures.


1. set max loss per trade at say $150 (or $300).
You can have many trades in a day.


2. set max loss per day at say $500 (or $1000)
Once you hit this limit, off your computer
and get out of your house IMMEDIATELY.

 

[Tradex]

But daytraders with a small account under 5k should have a higher risk % due to the lack of diversification and volatility.

Not at all, you can daytrade and diversify at the same time, there are dozens of commodities and Forex pairs you can select.

Also keep in mind that most markets (Forex, commodities, stock indices) have the same daily volatility, 1% move on average.

 

[traderking007]

truth from a math perspective would be as soon as you have a system that works 2 out of 3 times then split your money into 3rd and go big. this will save you months of slowly losing

this is why so few actually make money in trading they dont have a real system

 

[Tradex]

truth from a math perspective would be as soon as you have a system that works 2 out of 3 times then split your money into 3rd and go big

There are plenty of losing systems with 80% winning rate (or more).

The only time to go big is when your position is already a winning position, because now you are trading with the "house's money".

 

[traderking007]

the truth of the matte is mathematically you should actually put it all out there on 1 trade that you think is highly probable and if its gone its gone. you proved you couldnt trade and you can go get a job and make the money back. instead of taking months or years to understand teh same thing.

 

[traderking007]

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423101

 

[globalarbtrader]

A standard piece of risk management advice is not to risk X% percent of your portfolio. Should X be different for day traders versus longer-term traders who hold their position for weeks to months? Should day traders have a lower X?

What is the opinion of elitetraders regarding this matter?

Yes it should be different.

If only someone would write a blog post on this subject. Oh hang on...

https://qoppac.blogspot.com/2020/02/what-is-right-way-to-set-stop-losses.html
https://qoppac.blogspot.com/2020/03/how-much-risk-should-we-take.html
https://qoppac.blogspot.com/2020/04/how-fast-should-we-trade.html

GAT

 

[globalarbtrader]

Don't think so. But daytraders with a small account under 5k should have a higher risk % due to the lack of diversification and volatility.

No quite the opposite. The more diversified you are, the more risk you can take on each trade.

Account size is irrelevant to proportionate risk per trade

truth from a math perspective would be as soon as you have a system that works 2 out of 3 times then split your money into 3rd and go big. this will save you months of slowly losing

this is why so few actually make money in trading they dont have a real system

One third in each trade is insane

There are plenty of losing systems with 80% winning rate (or more).

The only time to go big is when your position is already a winning position, because now you are trading with the "house's money".

This may make pyschological sense, but there is no rational reason for the expectation of price movement to be determined by when one individual put on their trade.

the truth of the matte is mathematically you should actually put it all out there on 1 trade that you think is highly probable and if its gone its gone. you proved you couldnt trade and you can go get a job and make the money back. instead of taking months or years to understand teh same thing.

100% in one trade is even more insane than one third. By putting 100% in a trade you have already proven you shouldn't be trading, regardless of whether it works out or not.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423101

Very good paper with wise words. Its extremely unlikely that you will make money day trading.

GAT