Why you should trade 1-2% of your account on a trade! | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Why your broker is your friend and your enemy 8 replies

Why you should wait for your candle to close 2 replies

Why you always should have stop loss in your system 0 replies

Lessons you learn only when you blow up your account. 7 replies

Attachments: Why you should trade 1-2% of your account on a trade!
Exit Attachments

Why you should trade 1-2% of your account on a trade!

  • #1
  • First Post: Mar 29, 2018 1:46am Mar 29, 2018 1:46am
Hi Everyone,

One thing I dislike is seeing traders lose money because unfortunately it does not grow on trees.

I saved this image of a trader I use to look up to about 4-5 months back to know that trading 1-2% on manual trades is essential to survive (I trade big sizes on risk events for example ecb minutes etc because the volatility is very direct/quick and predictable).

Please use this image below to know that the aim of forex is to last forever and not in the short term.

I would be interested to know your views on how you manage risk to last for the long run.

Please take this thread very seriously because blowing your account could lead back to a 9-5!!!

Thank you.
Attached Image (click to enlarge)
Click to Enlarge Name: 20180326_155407.jpg Size: 473 KB
  • #2
  • Mar 29, 2018 3:02am Mar 29, 2018 3:02am
I prefer 0.1% to 0.2%.

Quoting Samson85
Hi Everyone, One thing I dislike is seeing traders lose money because unfortunately it does not grow on trees. I saved this image of a trader I use to look up to about 4-5 months back to know that trading 1-2% on manual trades is essential to survive (I trade big sizes on risk events for example ecb minutes etc because the volatility is very direct/quick and predictable). Please use this image below to know that the aim of forex is to last forever and not in the short term. I would be interested to know your views on how you manage risk to last...
"The meek shall inherit the earth.." Yeah right, good luck with that shit..
  • #3
  • Mar 29, 2018 3:10am Mar 29, 2018 3:10am
Quoting Spreadbetter
I prefer 0.1% to 0.2%. {quote}
I would imagine you have a very large account then or you're very risk aware.

What risk level did you originally start with when you 1st started?
  • #4
  • Edited 6:38am Mar 29, 2018 6:15am | Edited 6:38am
My broker has a required margin, which ranges from 2%-10% depending on the pair. That means I have to have money in reserve to place a trade. For instance, 1 lot of EURUSD might require $2400 to be set aside in order to make $10 per pip.

Now you are saying to only use 1-2% of that? $24-$48? LOL. Funny.

I add a set stop loss to the required margin and then divide my account balance by that "requirement" to know how many lots I can trade. So, if I use a stop loss of 40 pips, then I have to set aside $2800 for each lot. If I have $20,000 in my account, then I can trade a maximum of 7.14 lots (always round down). I adjust my lot maximum at the end of each trade according to the change in my account size, profit or loss.

I trade like that for two reasons. One, I built a good system. Two, the money is for trading, not saving. If you are basically doing demo on a live account, then sure, don't risk any money. The only other reason I can think of for risking pennies is that you place hundreds of trades at once and don't have a big enough account to risk more. Personally, I think that is where this idea came from, Wall Street, where they were placing multiple trades all day long, and somehow someone converted that strategy to include a retail trader, who is likely trading one pair at a time with one entry held until exit. So, kinda dumb, but that's my opinion.

I would have to disagree with your hypothesis. Losing more slowly still means you are losing. You should not risk money until you know how to win. Good Luck.
You cannot be extraordinary by being normal
  • #5
  • Mar 29, 2018 6:22am Mar 29, 2018 6:22am
Quoting dkrock
My broker has a required margin, which ranges from 2%-10% depending on the pair. That means I have to have money in reserve to place a trade. For instance, 1 lot of EURUSD might require $2400 to be set aside in order to make $10 per pip. Now you are saying to only use 1-2% of that? $24-$48? LOL. Funny.
Lol dont over complicate it.

For example if you have a $10,000 dollar account the most you should be willing to lose on a trade is $100-$200 to make sure you survive for the long haul. I does not really reflect margins etc or spreads although spreads may eat into the risk.
  • #6
  • Edited 7:00am Mar 29, 2018 6:41am | Edited 7:00am
Quoting Samson85
{quote} Lol dont over complicate it. For example if you have a $10,000 dollar account the most you should be willing to lose on a trade is $100-$200 to make sure you survive for the long haul. I does not really reflect margins etc or spreads although spreads may eat into the risk.
The most I would be willing to lose is my stop loss, not a percentage of my account. My stop loss is naturally multiplied by the number of lots I use. You have basically divided my scenario by two, so I would be able to place 3.57 lots with a 40 pip stop loss. My accepted loss is $1428, though it is extremely unlikely I would still be in the market when my stop is hit because that is not how my trading system works. It is just a catastrophic stop loss value. I think differently because I trade, not gamble. But, that is me. My business plan centers around compounding lot sizes, number of pairs, and number of accounts. So, I compound. But, you need to know how to trade. If you have a "long haul" issue, you should fix it before risking any money. One of the best ways to fix it is to journal your experiences, figure out what is missing, implement the missing pieces, and analyze again. If your focus is on losing, you will probably lose. My strategy works for me because I built it that way. If this doesn't fit your strategy, no problem. Hardly any two people trade the same way, lol. My way is just an alternate view of your theory. Good Luck.
You cannot be extraordinary by being normal
  • #7
  • Mar 29, 2018 7:12am Mar 29, 2018 7:12am
For my private trading I have a ‘reasonable’ line of credit, from a former employer. I aim for approx 60% account growth per annum, roughly 1% a week. I risk circa 0.05% - 0.1% per trade, worst drawdown this year has been 0.75%, I’m fully automated, never hold trades overnight, and have a daily circuit breaker of 0.5%, If that’s hit then all positions automatically close.

As for risk when I first started trading, hmm, first trades were buy and hold equities 20+ years back. And for a long time I would only swing trade FX.

Quoting Samson85
{quote} I would imagine you have a very large account then or you're very risk aware. What risk level did you originally start with when you 1st started?
"The meek shall inherit the earth.." Yeah right, good luck with that shit..
  • #8
  • Mar 29, 2018 7:20am Mar 29, 2018 7:20am
Quoting dkrock
{quote} The most I would be willing to lose is my stop loss, not a percentage of my account. My stop loss is naturally multiplied by the number of lots I use. You have basically divided my scenario by two, so I would be able to place 3.57 lots with a 40 pip stop loss. My accepted loss is $1428, though it is extremely unlikely I would still be in the market when my stop is hit because that is not how my trading system works. It is just a catastrophic stop loss value. I think differently because I trade, not gamble. But, that is me. My business plan...

That was a fab insight what you just provided in terms of how you manage your risk. The picture I put up in this thread shows someone going bonkers on a live account and I am sure they have blown that account because eur/usd rallied since then.

I really hope retail traders take risk seriously because that is what usually the downfall its not even just based on losing.
  • #9
  • Mar 29, 2018 7:26am Mar 29, 2018 7:26am
I see two versions of stop loss, one tied to account size, and one tied to market price. In essence, I suppose both would be factoring in market price and suggesting a losing trade. I prefer to use the market to guide the stop, rather than how much money I am willing to lose. I prefer to take what the market gives, rather than try to control it based on my risk. It is just a difference of opinion. The key is that in both examples, a loss is stopped at some point and not allowed to cripple your account.
You cannot be extraordinary by being normal
  • #10
  • Mar 29, 2018 7:34am Mar 29, 2018 7:34am
Quoting Spreadbetter
For my private trading I have a ‘reasonable’ line of credit, from a former employer. I aim for approx 60% account growth per annum, roughly 1% a week. I risk circa 0.05% - 0.1% per trade, worst drawdown this year has been 0.75%, I’m fully automated, never hold trades overnight, and have a daily circuit breaker of 0.5%, If that’s hit then all positions automatically close. As for risk when I first started trading, hmm, first trades were buy and hold equities 20+ years back. And for a long time I would only swing trade FX. {quote}
The holding trades overnight is very subjective. For example I went long via swing trade gbp/nzd and hedged going long on gbp/aud just in case rbnz came out bullish or something bad happened in either country. I banked over 300 pips via holding over night.

Are you not holding trades over night just in case of some form flash crash?

60% per annum is a fab return considering the line of risk you're trading with. If you're pulling that off then your a super pro.

The only time I go in with heavy risk is when trading speeches or interest rate minutes as well as post central bank press conferences. For example I traded eur/nok interest rate minutes knowing they would be hawkish as cpi was above their target rate for that month. EUR/NOK gained strength rapidly and I profited big.
  • #11
  • Mar 29, 2018 7:37am Mar 29, 2018 7:37am
My trades can last from seconds in time to hours. The programme may enter trades overnight, but I never hold over. The programme is based on levels that are recalibrated at the e.o.d.

Quoting Samson85
{quote} The holding trades overnight is very subjective. For example I went long via swing trade gbp/nzd and hedged going long on gbp/aud just in case rbnz came out bullish or something bad happened in either country. I banked over 300 pips via holding over night. Are you not holding trades over night just in case of some form flash crash? 60% per annum is a fab return considering the line of risk you're trading with. If you're pulling that off then your a super pro. The only time I go in with heavy risk is when trading speeches or interest rate...
"The meek shall inherit the earth.." Yeah right, good luck with that shit..
  • #12
  • Mar 29, 2018 7:38am Mar 29, 2018 7:38am
Quoting dkrock
I see two versions of stop loss, one tied to account size, and one tied to market price. In essence, I suppose both would be factoring in market price and suggesting a losing trade. I prefer to use the market to guide the stop, rather than how much money I am willing to lose. I prefer to take what the market gives, rather than try to control it based on my risk. It is just a difference of opinion. The key is that in both examples, a loss is stopped at some point and not allowed to cripple your account.
I agree with you based on your stop loss matching the market price etc. That would mean trading with lot sizes in relation to where your stop would be best placed.
I still think a trader should be focused on how much they could lose in comparison to how much they could win just to keep the ego intact.
  • #13
  • Mar 29, 2018 7:45am Mar 29, 2018 7:45am
Quoting Spreadbetter
My trades can last from seconds in time to hours. The programme may enter trades overnight, but I never hold over. The programme is based on levels that are recalibrated at the e.o.d. {quote}
Whats the success rate of your automated system?
  • #14
  • Mar 29, 2018 7:46am Mar 29, 2018 7:46am
Quoting Samson85
{quote} I agree with you based on your stop loss matching the market price etc. That would mean trading with lot sizes in relation to where your stop would be best placed. I still think a trader should be focused on how much they could lose in comparison to how much they could win just to keep the ego intact.
My calculated stop loss is purely catastrophic. The real stop is based on my trading system. My simplest definition is that I trade intraday swings, where my next entry is also my exit. Not always the case, but it is the design. That is why my stop never gets hit unless I lose power or my Internet connection. That is why I can arrange my risk the way I do. I focus on winning, not losing. A loss means a change in direction, or I got stuck in some type of consolidation that I need to get out of, lol.
You cannot be extraordinary by being normal
  • #15
  • Mar 29, 2018 7:55am Mar 29, 2018 7:55am
Subs. Thanks and
Regards
  • #16
  • Mar 29, 2018 7:57am Mar 29, 2018 7:57am
Quoting dkrock
{quote} My calculated stop loss is purely catastrophic. The real stop is based on my trading system. My simplest definition is that I trade intraday swings, where my next entry is also my exit. Not always the case, but it is the design. That is why my stop never gets hit unless I lose power or my Internet connection. That is why I can arrange my risk the way I do. I focus on winning, not losing. A loss means a change in direction, or I got stuck in some type of consolidation that I need to get out of, lol.
Lol of course I focus on winning but I am also very conscious of how much I can lose because some ppl seem to forget that drawdown is a part of trading. Like imagine being in the position of that pic I posted. Thats a 100k account which isn't peanuts even for a millionaire trader. So in my mind I already know what my loss would look like but my aim is to not have to see that loss.
  • #17
  • Mar 29, 2018 8:00am Mar 29, 2018 8:00am
Hmm, I/we don’t obsess over the percentage breakdown of winners v losers.

Here’s a link to a useful site and an article covering one metric such as Sharpe ratio and its pros and cons. Might be worth you bookmarking this simple site.

https://www.quantstart.com/articles/Sharpe-Ratio-for-Algorithmic-Trading-Performance-Measurement

Here’s another basic site which is in fact the one owned by FXCM. Fwiw and imho, this is where the retail industry is headed. Learn to code, even if it’s MQL, and basic python.

https://www.quantnews.com/?utm_campaign=2018%2003%2012%20FXCM%20EN%20QuantNews%20Newsletter%20Launch%20Email%20-%20Leads&utm_medium=email&utm_source=Eloqua

Quoting Samson85
{quote} Whats the success rate of your automated system?
"The meek shall inherit the earth.." Yeah right, good luck with that shit..
  • #18
  • Mar 29, 2018 10:14am Mar 29, 2018 10:14am
Quoting Spreadbetter
Here’s a link to a useful site and an article covering one metric such as Sharpe ratio and its pros and cons. Might be worth you bookmarking this simple site. https://www.quantstart.com/articles/Sharpe-Ratio-for-Algorithmic-Trading-Performance-Measurement {quote}
I was thinking about the same thing the other day. "Risk" is different depending on how you measure it. Two hedge funds could have the same return, but depending on what benchmark they are compared to, they will have different alpha.

Very interesting article. Thank you for sharing!
  • #19
  • Mar 29, 2018 10:55am Mar 29, 2018 10:55am
Bookmark both sites and in coffee/tea breaks quietly work your way through the articles and content. Worth doing as this is where retail is headed. The only consistently profitable retailers I know know also how to code, they employ automated strats, they obsess over issues such as speed of execution, low latency, tiny spreads, etc. There’s a financial engineering revolution been going on, that the old school retail traders on here have seen pass them by. Get with it.

Quoting ezbro
{quote} I was thinking about the same thing the other day. "Risk" is different depending on how you measure it. Two hedge funds could have the same return, but depending on what benchmark they are compared to, they will have different alpha. Very interesting article. Thank you for sharing!
"The meek shall inherit the earth.." Yeah right, good luck with that shit..
  • #20
  • Mar 29, 2018 11:14am Mar 29, 2018 11:14am
Quoting Spreadbetter
Bookmark both sites and in coffee/tea breaks quietly work your way through the articles and content. Worth doing as this is where retail is headed. The only consistently profitable retailers I know know also how to code, they employ automated strats, they obsess over issues such as speed of execution, low latency, tiny spreads, etc. There’s a financial engineering revolution been going on, that the old school retail traders on here have seen pass them by. Get with it. {quote}

Yes im a full time betfair trader.

Same applies.

The pros use bots.
0 traders viewing now