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

  • #21
  • Edited 6:25pm Mar 29, 2018 6:09pm | Edited 6:25pm
Quoting Samson85
{quote} some ppl seem to forget that drawdown is a part of trading
Sure, but once you get good at trading, draw down rarely happens. But, I suppose that depends if your design is built to restrict it. Some people just take both sides of a trade at once and then wait to see which one has more strength, lol, so they don't care about draw down. If it should happen to me, which is rare, I can usually tell if it is a head fake or a real reverse. My design seeks out the sweet spots, so I rarely see any draw down. I don't trade like the 95%, lol. I use the equilibrium of the market and trade the apexes, not lines drawn from trades that have already ended. There is no guessing. The only losses I see really are if the range is too tight, such as 3 up with no substantial growth and then back down. I might miss the break-even point and take a small loss to validate the range reversal is not a misdirection. Other than that, I would have to be surprised by a spike I guess, but I generally exit the market for news releases and don't bother to trade them. It is all in what you want to do, and then designing your system to measure your plan. My system is me, and I am my system. It is faster at doing the math, lol, but it is my math. Instead of trying to get all the pips, I compound high probability areas. Knowing that the vast majority of my potential losses are closely connected to break-even allows me to trade at the risk level I described. Therefore, unless you do what I do, it is unlikely my risk level is acceptable for anyone else. I was just offering an alternative view to your topic. Good Luck.
You cannot be extraordinary by being normal
  • #22
  • Mar 30, 2018 5:06am Mar 30, 2018 5:06am
Quoting dkrock
{quote} Sure, but once you get good at trading, draw down rarely happens. But, I suppose that depends if your design is built to restrict it. Some people just take both sides of a trade at once and then wait to see which one has more strength, lol, so they don't care about draw down. If it should happen to me, which is rare, I can usually tell if it is a head fake or a real reverse. My design seeks out the sweet spots, so I rarely see any draw down. I don't trade like the 95%, lol. I use the equilibrium of the market and trade the apexes, not lines...
Drawdown is not a bad thing if you're
Fundamentally on the correct side of the trade as it will go back in your direction based on the core fundamentals. Breaking news can tank a market and the sentiment can last a session or two but the market will then resume the fundamental direction of your trade.

Example is gbp/USD. Dollar is gaining strengh due to month end flows by the big banks but in due course the gbp/USD will rise as traders are looking to price in a potential rate hike this may and there is also talk of another rate hike year end.

Drawdown can happen but your analysis should be able to tell you the duration of the drawdown or whether downward trend has formed permanently.

One has to know how to cut losses intelligently and not just because a trade goes against you.
  • #23
  • Mar 30, 2018 7:07am Mar 30, 2018 7:07am
Quoting dkrock
{quote} I trade intraday technical analysis and exit the market for fundamentals. We have different strategies, so different tolerances and allowances on price. Each of us has to trade according to our skill and desires. I have no interest in trying to guess fundamental data so on my SWOT it is a weakness, so I simply do not bother with it. I am very good however, at creating regression curves and trading against them. I see your point of not wanting to risk much money if you are doing buy and hold until it turns into profit. It is not my style...
I can really respect the logic to your trading and I wish other technical traders would consider the fundamentals to avoid something catastrophic happening.
  • #24
  • Mar 30, 2018 8:08am Mar 30, 2018 8:08am
Quoting dkrock
{quote} I used to be manpower problem solver and for almost every client I was asked to do an historical analysis of how the current situation was created. I thought it was absolutely stupid. Why did it matter? What is your problem today, and how I can fix it?? Wasting time digging through historical files so I could make a one sentence statement about something that happened 5 years ago was just ridiculous, so I refused to do it. That is probably how I arrived at my conclusion concerning fundamentals. I have no access to the data driving them until...
Lol your funny.

Fundamental isnt just maths it's broader spectrum.

A perfect example is Canadian dollar.

Last year when the bank of Canada indicated that they were going to hike interest rates everyone went crazy and started buying cad. Now we have a situation with nafta where trump is being difficult and refusing to do a nafta deal and that has weakened the cad. You'l see that gbp/cad has done a strong rally the last 6 weeks or so.

Another example is when the bank of Japan a few years back announced qe and said they wanted to see a weaker yen so the market went crazy and started selling the yen. So imagine knowing all of this - this could have made you a fortune. I was trading gbp/cad quite frequently and banking pips because it was eas. If I had been an active trader when Japan announced qe then I'd be millionaire because I would have used all the leverage in the world.

George Soros made 1 billion pounds in a day betting against the pound lol because he understood the fundamental.
  • #25
  • Mar 30, 2018 9:56am Mar 30, 2018 9:56am
Quoting dkrock
{quote} I trade intraday technical analysis and exit the market for fundamentals. We have different strategies, so different tolerances and allowances on price. Each of us has to trade according to our skill and desires. I have no interest in trying to guess fundamental data so on my SWOT it is a weakness, so I simply do not bother with it. I am very good however, at creating regression curves and trading against them. I see your point of not wanting to risk much money if you are doing buy and hold until it turns into profit. It is not my style...

Very interesting post.

Over the years whats your monthly Profit average?

Kind regards,
  • #26
  • Mar 30, 2018 11:58am Mar 30, 2018 11:58am
Quoting Samson85
Please use this image below to know that the aim of forex is to last forever and not in the short term. {image}
Lol to last forever doing what ? Losing some or making some?
in and out quick is the name of the game.
  • #27
  • Mar 30, 2018 1:12pm Mar 30, 2018 1:12pm
Quoting metta87
{quote} Lol to last forever doing what ? Losing some or making some? in and out quick is the name of the game.
Hmmm this post is for people to share there experience on managing risk technically and fundamentally.

Unfortunately you can't get in and out quick when trading all the time.

Could be a day or even weeks depending on the trade itself.
  • #28
  • Mar 30, 2018 2:57pm Mar 30, 2018 2:57pm
If you have micro account, using 1-2% would make account to remain around the level where it starteduntil it blows away. It would never grow. Learn to increase lot from the profits of the closed positions
Make all mistakes in demo and rain in pips in live account
9jatrader All Time Return: -66.1%
  • #29
  • Mar 30, 2018 7:27pm Mar 30, 2018 7:27pm
It's easy to be vigilant against risk when your psychology is proper. It's only numbers. The failing is in our psychology; that which a lower percentage buffers against. I risk 25% to 45%. I stop trading when I lose. When I lose, it's me not the market. Only a very small percentage of my trade failure has anything to do with the market. It's important for me to stop when I lose. It's important to limit the time spent trading. It's important to limit the number of trades. It's important to just go do life, forget the market, stop thinking and enjoy something. Come back when my mind is care-free.

Source: Mark Douglas
  • #30
  • Mar 30, 2018 8:03pm Mar 30, 2018 8:03pm
Quoting 9jatrader
If you have micro account, using 1-2% would make account to remain around the level where it starteduntil it blows away. It would never grow. Learn to increase lot from the profits of the closed positions
We are obviously talking about accounts from $10k upwards.

Blowing an account with a few hundred dollars is not going to be life changing.

The picture for this thread shows an account in drawdown of over $100k which could be a deposit for a $2million home.
  • #31
  • Mar 30, 2018 8:05pm Mar 30, 2018 8:05pm
Quoting 2dollardog
It's easy to be vigilant against risk when your psychology is proper. It's only numbers. The failing is in our psychology; that which a lower percentage buffers against. I risk 25% to 45%. I stop trading when I lose. When I lose, it's me not the market. Only a very small percentage of my trade failure has anything to do with the market. It's important for me to stop when I lose. It's important to limit the time spent trading. It's important to limit the number of trades. It's important to just go do life, forget the market, stop thinking and enjoy...
Hmmm not sure I agree with the 25% to 45%. If this was long term investing I would understand but for day trading that would be insane.
  • #32
  • Mar 31, 2018 1:06am Mar 31, 2018 1:06am
Quoting Samson85
{quote} Hmmm not sure I agree with the 25% to 45%.
I've only met 2 who didn't disagree, but they also know me pretty well.

I'm able to do it because

1) I don't give a &*(! about money and
2) I love to trade.

The most arguments I get are about *I don't give a &*(! about money*, because FX to most is solely about money. I don't care, but must have it. So, I was like WTF? I want a lot of it then so it will shut everyone up.

Just watch. Argument in... 3 .... 2 .... 1 ...

edit: cleaned up
  • #33
  • Mar 31, 2018 1:15am Mar 31, 2018 1:15am
"for example ecb minutes etc because the volatility is very direct/quick and predictable".... I used to think that, once upon a time.
  • #34
  • Edited 10:35pm Mar 31, 2018 2:18am | Edited 10:35pm
Optimum bet size can be determined by the Kelly formula (https://www.investopedia.com/articles/trading/04/091504.asp) (more here (https://www.forexboat.com/kelly-criterion/)). However, this doesn't give capital preservation any overriding consideration. But as a general principle, it tells us that the higher our profit factor (dollars won divided by dollars lost), the greater the mathematical justification for a higher position size**. Hence (assuming you're trading a meaningful account size) building a risk model comes down to analysing past performance, including worst case drawdown, and then establishing a VAR value (risk per position) that's both mathematically sound, and keeps drawdown at a level that you're personally comfortable with. Monte Carlo-like simulations can also be helpful in building a risk model (here (http://www.equitycurvesimulator.com/) and here (http://swaytheworld.com/equityCurveSim.html) are two equity curve simulation generators).

However, if your account size is trivial (e.g. $100), and a margin call is of no consequence, then you might as well use something approaching the Kelly value.

Position size should be calculated so that risk is consistent across each position, otherwise you run the risk that one larger-sized loss could wipe out the progress made by several smaller wins. However, if certain entry setups have a higher probability of success than others, then you're mathematically justified in increasing position size to a level that's commensurate with the improved probability.
____________________
**[EDIT] Here are a couple of hypothetical examples illustrating the use of Kelly:

(1) Win rate = 90%, 1:1 RR; then Kelly = 0.9 - (0.1/1) = 0.8, i.e. risk 80% of your capital per position. Obviously (if capital preservation is important) this is too high, but it shows that the textbook 1%-2% VAR in this scenario would be unnecessarily way too low.

(2) Win rate = 55%, 1:1 RR; then Kelly = 0.55 - (0.45/1) = 0.1, i.e. risk 10% of your capital per position. Hence in this situation, risking anything above 10% would be suicidally high; the textbook 1%-2% would be much more sensible, if capital preservation is paramount.
  • #35
  • Mar 31, 2018 2:36am Mar 31, 2018 2:36am
Quoting 2dollardog
{quote} I've only met 2 who didn't disagree, but they also know me pretty well. I'm able to do it because 1) I don't give a &*(! about money and 2) I love to trade. The most arguments I get are about *I don't give a &*(! about money*, because FX to most is solely about money. I don't care, but must have it. So, I was like WTF? I want a lot of it then so it will shut everyone up. Just watch. Argument in... 3 .... 2 .... 1 ... edit: cleaned up
Well its good to see that you're in fx for the thrill and the excitement of it. For example I love winning trades and the fact you can earn money from it is a bonus. So I don't disagree with your mentality at all (you could probably word it better as we have people on this site who are sensitive to derogatory words).

Your level of risk is quite high and I'd imagine you're only trading high conviction patterns or getting in right at the time when the fundamentals kick in.
  • #36
  • Mar 31, 2018 2:39am Mar 31, 2018 2:39am
Quoting Nicholishen
"for example ecb minutes etc because the volatility is very direct/quick and predictable".... I used to think that, once upon a time.
So you don't think trading central bank minutes is possible? You'l need some form of squawk to do that or you'l need access to the central bank site to read it yourself immediately upon release.

Trading central bank minutes are very profitable and speeches as well (The pretext is always released before they talk so that's when traders make their moves)
  • #37
  • Edited 4:48pm Mar 31, 2018 8:41am | Edited 4:48pm
1-10% for me is ok
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Self discipline It is a practice
  • #38
  • Mar 31, 2018 9:09am Mar 31, 2018 9:09am
Quoting okshop
1-10% for me is ok {image} {file}
That I can partially agree with but remember making 100k on a 1,000,000 dollar account is kl but losing 100k on it isn't. so 10% is alot unless you have super patience to do high conviction trades when they come around.
  • #39
  • Mar 31, 2018 10:54am Mar 31, 2018 10:54am
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...
is this ur words? how u trade? or what is it?
WaBaS Where are Buyers and Sellers
  • #40
  • Mar 31, 2018 1:41pm Mar 31, 2018 1:41pm
Quoting mr.brown
{quote} is this ur words? how u trade? or what is it?
So let's say I have a £20k account and I want to trade ecb minutes or post draghi speech. I am willing to probably risk 20% of the account as I know it will move in a long trend for a long duatation until it hits s3 or r3 pivot points.

If I am doing a normal trade where I have used a technical entry I will only risk maximum 2% of the account as a straight direction isn't guaranteed due to bulls and bears battling it out.

Hope that makes sense.
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