Subject: Leverage
I have 2 Trading Systems:
System I : Profit Loss Ratio 55:45 and the Risk Reward ratio of 3:1
System I: 100 Trades with SL 25 pips PT 75 I gain 4125 pips and loose 1125 pips =3000 pips net profit.
System II : Profit Loss Ratio 90:10 Risk Reward ratio of 1:1
System II: 100 Trades with SL 10 pips PT 10 I gain 900 pips and loose 100 pips = 800 pips net profit.
Now, because of the very nature of the two Systems ,I may loose a series of trades one after the other, meaning that:
System I: At the worst case scenario draw down 45 trades a 25 pips = 1125 pips
System II: At the worst case scenario draw down 10 trades a 10 pips= 100 pips
In light of thi,s I am only trading the System I with 1% risk per trade of the peak capital consistently.
Further, I got the possibility in System II to risk 4% per trade of the peak capital consistently
so this would mean that systwm II would performwith 800 pips times 4 = 3200 pips profit.
Now my question is, would you rather prefer system I with less profit but also less risk involved per trade
or would you prefer System II ?
What I am trying to figure for my self for years on the psychological level System 1 gives me the freedom of risking less per trade but the downside is I may have a large number of trades going against me and may have problems to follow through the System,
and with System II I have a lot of profitable trades in one go, but it is sometimes very stressful to risk so much on the capital and if things go bad I loose a lot in a very short time.
What would you suggest? And what is your opinion?
Thanks for any advice.
I have 2 Trading Systems:
System I : Profit Loss Ratio 55:45 and the Risk Reward ratio of 3:1
System I: 100 Trades with SL 25 pips PT 75 I gain 4125 pips and loose 1125 pips =3000 pips net profit.
System II : Profit Loss Ratio 90:10 Risk Reward ratio of 1:1
System II: 100 Trades with SL 10 pips PT 10 I gain 900 pips and loose 100 pips = 800 pips net profit.
Now, because of the very nature of the two Systems ,I may loose a series of trades one after the other, meaning that:
System I: At the worst case scenario draw down 45 trades a 25 pips = 1125 pips
System II: At the worst case scenario draw down 10 trades a 10 pips= 100 pips
In light of thi,s I am only trading the System I with 1% risk per trade of the peak capital consistently.
Further, I got the possibility in System II to risk 4% per trade of the peak capital consistently
so this would mean that systwm II would performwith 800 pips times 4 = 3200 pips profit.
Now my question is, would you rather prefer system I with less profit but also less risk involved per trade
or would you prefer System II ?
What I am trying to figure for my self for years on the psychological level System 1 gives me the freedom of risking less per trade but the downside is I may have a large number of trades going against me and may have problems to follow through the System,
and with System II I have a lot of profitable trades in one go, but it is sometimes very stressful to risk so much on the capital and if things go bad I loose a lot in a very short time.
What would you suggest? And what is your opinion?
Thanks for any advice.