I think both stockie and you are intelligent people. I think that what he wrote has deep meaning, and he seems to be thoughtful, I do not know him, but I noticed his questions and I like them. And he is polite.
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The Unmentioned Risk of Trading Too Small
- Thread starter Stockie
- Start date
I think both stockie and you are intelligent people. I think that what he wrote has deep meaning, and he seems to be thoughtful, I do not know him, but I noticed his questions and I like them. And he is polite.
Quote from Visaria:
LOL, I also post in the CL thread, but actually i trade many different markets and time frames.
The point was really to say that even with a relatively small amount of risk like half a percent, you can make a lot of money over enough trades (assuming you have an edge).
Fair LOL. What I saw was a setup that justified those numbers. It's possible or probable I was looking at a different time frame that had little or no bearing on your overall strategy. It's a good thing this is an ongoing conversation.
As an example, with a 0.25 win rate, 1:5 risk:reward, 0.5% capital risked per trade and 2 trades per day +100% annually is comfortably achievable.
You don't even have to recalculate the amount to be risked after every trade. You could wait until you hit a predetermined level. For example, say you start with an initial $100,000. 0.5% is $500. You can keep risking $500 until your closed equity either decreases by $10k or up by 10k. Then you recalculate the 0.5%. Basically, every time you only recalculate once you have either made or lost $10k.
Quote from tradingjournals:
I think both stockie and you are intelligent people. I think that what he wrote has deep meaning, and he seems to be thoughtful, I do not know him, but I noticed his questions and I like them. And he is polite.
I didn't take offence, but thanks anyway. It's like I've found a friend at a new school. Participating in forums like this is new to me. It's a validation service if nothing else.
Quote from Visaria:
You don't even have to recalculate the amount to be risked after every trade. You could wait until you hit a predetermined level. For example, say you start with an initial $100,000. 0.5% is $500. You can keep risking $500 until your closed equity either decreases by $10k or up by 10k. Then you recalculate the 0.5%. Basically, every time you only recalculate once you have either made or lost $10k.
I had been edging towards this kind of thing, which does seem practical.
Going a step further there's prop firm (trainee) like risk levels: $25, $50, $100, $200, and so on. The levels can increase like this while there's cash on the sidelines to boost the initial account. Like you say the level could go up or down. Two weeks target hit: increase level. 1 week target missed: decrease level.
If things go to plan this gets you trading proper money in a short amount of time.
Quote from Stockie:
I had been edging towards this kind of thing, which does seem practical.
Going a step further there's prop firm (trainee) like risk levels: $25, $50, $100, $200, and so on. The levels can increase like this while there's cash on the sidelines to boost the initial account. Like you say the level could go up or down. Two weeks target hit: increase level. 1 week target missed: decrease level.
If things go to plan this gets you trading proper money in a short amount of time.
The answer you got does not seem to me to be an answer to your question. I understand your question is NOT when to change the amount on which to apply the 0.5%, but rather to change the 0.5% to another number say 1% etc.
Quote from tradingjournals:
The answer your got does not seem to me to be an answer to your question. I understand your question is NOT when to change the amount on which to apply the 0.5%, but rather to change the 0.5% to another number say 1% etc.
You're right, that was the question. Put another way, there's a lot of sentiment on reducing risk, but not so much (that I've seen) on optimising it for maximum account growth. At the extreme end the trader who risks 'too much' could blow up his account 3 times and still come out ahead of the trader who risks 'too little'. I became concious I was probably the latter.
For me anything to do with risk management is relevant, including continuous vs discrete. I'd be happy for the thread to take any direction at this point. By the way, with reference to Jack earlier, has anyone managed 7 doublings in a year or anything close?