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Position size - Looking for an advice

  • #1
  • Quote
  • First Post: Nov 26, 2005 4:55pm Nov 26, 2005 4:55pm
Hello again

I read many advices here and from many other sources (Tharp and so on). Everyone says to stay alive one should risk not more than 3-5% or max 10% in a transaction. Good - I understand it and I beleive it.

I play live 7 weeks. Play just for testing with small money. Involving every time almost 100% of capital. I am still alive

I gained in the first week +60pips, then +60, +30, +50,+20,+40 and last week I made +35. I played the whole time with the same rules - no changes, no exceptions. Through this time the chart demonstrated many different arts of behaviour - but I still have not had a single loss (weekly).

I plan to invest more yet this year and I want to stop playing crazy and go down with my position size.

My question is:
Should I REALLY involve only 3-5 or 10% of my capital when it grows? I mean....considerung my stable results I made until now? What would you do?
I obviously have some devil ideas that 40% would be still safe with my system......
time is money! Z
  • #2
  • Quote
  • Nov 26, 2005 5:15pm Nov 26, 2005 5:15pm
Hello Zazzy.

Ask yourself this: do you want to be in this game for the long run? then play safe and dont risk more than 3% of your account per trade.

If you keep risking a large % of your account per trade, then you will get burnt sooner or later. You might get lucky once, twice, three times, hell twenty times in a row, but eventually your account is bound to face a nasty kick in the nuts.

Play safe man, be conservative, think long term, and you will survive the long run.
  • #3
  • Quote
  • Nov 26, 2005 5:57pm Nov 26, 2005 5:57pm
$100,000 Capital

0.5% Risk Per Trade = $500 Risk Per Trade

10 Pip Stop = $50 Per Pip

100 Pips Per Month = $5000

x 12 Months = $60K (Without Compounding)

So using the above example of 0.5% RPT, if you can average a profit of 100 pips a month for a year, it is a good return.

To lose 1/2 your capital amount you would need to have a negative count of 100 trades.

If you are trading a major pair such as cable, which has a high average daily range and low spread erosion, 100 pips a month should be a reasonable and conservative target......................Assuming you have discovered an edge.

Staying in the game is the aim. It's all about capital preservation.
  • #4
  • Quote
  • Nov 26, 2005 7:07pm Nov 26, 2005 7:07pm
Quoting Zazzy
I gained in the first week +60pips, then +60, +30, +50,+20,+40 and last week I made +35. I played the whole time with the same rules - no changes, no exceptions. Through this time the chart demonstrated many different arts of behaviour - but I still have not had a single loss (weekly).
..
If you want to lose all of your money, go ahead and risk 40% of your float in a trade. Do this all the time and see how you go. Not sure if it will take 1 month, 2 months, 6 months or a year but you will do it.

Simon
  • #5
  • Quote
  • Nov 26, 2005 9:18pm Nov 26, 2005 9:18pm
Quoting DrRock
If you want to lose all of your money, go ahead and risk 40% of your float in a trade. Do this all the time and see how you go. Not sure if it will take 1 month, 2 months, 6 months or a year but you will do it.

Simon
I wrote "position size 40%", not risking 40%. I play on a slow egzotic pair and the biggest loss I had ONCE was about 20 pips. (my stop loss is far away-50pips - just not to disturb.....and never disturbed)

So having e.g. 100k$ and investing 40k$ in a trade I risk some 20x150$=3000$ so I risk in fact only 3% of capital in a trade.

Let us say I have a bad week and experience 5 such losses - then I lose 15% of my capital.
Let us say my stop loss executes once - 50pips*150=4500$

Even cumulated all this losses the drowdown is less then 20%.
Still reasonable, is not it?
time is money! Z
  • #6
  • Quote
  • Nov 26, 2005 10:32pm Nov 26, 2005 10:32pm
Quoting Zazzy
I wrote "position size 40%", not risking 40%. I play on a slow egzotic pair and the biggest loss I had ONCE was about 20 pips. (my stop loss is far away-50pips - just not to disturb.....and never disturbed)

So having e.g. 100k$ and investing 40k$ in a trade I risk some 20x150$=3000$ so I risk in fact only 3% of capital in a trade.

Let us say I have a bad week and experience 5 such losses - then I lose 15% of my capital.
Let us say my stop loss executes once - 50pips*150=4500$

Even cumulated all this losses the drowdown is less then 20%.
Still reasonable, is not it?

So where is the problem then??? You seem to have good risk control as far as I can understand from the numbers you mentioned??

If you mean what you mentioned in your first post of the thread, then people are right, hundred lucky trades will be completely erroded by just 1 unlucky trade..With no risk control and with risking all the capital on every trade, it will seem rosy and promising in the beginning, until you buy at a point and the market starts sinking and never comes back to this point once again, either in a lifetime or until you get a margin call (Most forex brokers will not wait for a margin call and will liquidate the position, you take the loss, they take the spread + rollovers + the money they lended you and you are out of the game)...


Thanks,

Nader
  • #7
  • Quote
  • Nov 27, 2005 1:43am Nov 27, 2005 1:43am
Quoting Zazzy
I read many advices here and from many other sources (Tharp and so on). Everyone says to stay alive one should risk not more than 3-5% or max 10% in a transaction. Good - I understand it and I beleive it.

......

Should I REALLY involve only 3-5 or 10% of my capital when it grows? I mean....considerung my stable results I made until now? What would you do?
I obviously have some devil ideas that 40% would be still safe with my system......
Zazzy,

Sorry, I misunderstood what you said above. Your tradesize as a % of your float is largely irrelevant - it is your risk as a % of your float that is relevant.

Simon
  • #8
  • Quote
  • Last Post: Nov 27, 2005 4:56am Nov 27, 2005 4:56am
Quoting narafa
So where is the problem then??? You seem to have good risk control as far as I can understand from the numbers you mentioned??
Nader
actually I realised that making me more precise in my last post I answered myself on my own question. Funny that I needed to arise a new discussion to unterstandsuch a simple issue

Sorry for the first not precisely enough defined post and thanks for advices - I see the point now!

Good trading week for all you guys
time is money! Z
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