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Money Management Rule of Thumb Question

  • #1
  • First Post: Jul 24, 2007 12:46pm Jul 24, 2007 12:46pm
Guys,

What is a good rule of thumb when it comes to money management!

If you had say $50,000 in account. How much in trades should be in the market at one given time. 10%, 15%, 25%, 50% or more?

Considering you want to be conservative to moderate level of trading.

Your input would be greatly appreciated.

Have been trading for past year and looking to go a bit bigger.
  • #2
  • Jul 24, 2007 12:50pm Jul 24, 2007 12:50pm
I always use 1-2% per trade, maximum 10-15% of my account
Trade what you see, not what you think.
  • #3
  • Jul 24, 2007 1:26pm Jul 24, 2007 1:26pm
I was leaning toward 10-15% percent of account at one time also.

Here is what I was thinking.

$100,000 Total

$50,000 in Bank (emergency purposes).
$50,000 in broker account
With about 10-15% used in live trading. ($7,500 in trades at one time)
Which equals to 7.5 standard lots at 1% or $1,000 margin per lot.

Tell me what your think! Is this considered ultra-conservative, conservative, moderate, agressive?
  • #4
  • Jul 24, 2007 1:36pm Jul 24, 2007 1:36pm
Quoting newjersey24
I was leaning toward 10-15% percent of account at one time also.

Here is what I was thinking.

$100,000 Total

$50,000 in Bank (emergency purposes).
$50,000 in broker account
With about 10-15% used in live trading. ($7,500 in trades at one time)
Which equals to 7.5 standard lots at 1% or $1,000 margin per lot.

Tell me what your think! Is this considered ultra-conservative, conservative, moderate, agressive?
That looks good to me, I would do the same.

Using 10-15% of your account is between conservative and moderate to me.
Trade what you see, not what you think.
  • #5
  • Jul 24, 2007 2:32pm Jul 24, 2007 2:32pm
Thanks, I felt 10-15% would be conservative-moderate.

When time is right in certain market condition may got to 25% and thats about it.

Thanks man.
  • #6
  • Jul 24, 2007 2:58pm Jul 24, 2007 2:58pm
Wrong question in my opinion. The question should be: "How much risk am i willing to take in my portfolio at any one time?"

Its perfectly possible to have your 10-15% in used margin, but near zero risk in terms of market-movement (in the case your positions have developed in your direction, and your stops are at break-even or better).
Its also possible to have just a 3% margin used figure, but have a very high percentile of your account-value (or even more than that) at risk (in the case your stops are very far away, or you dont use stops at all). It makes much more sense to track your risk, rather than just use a hard percentile of your account money. I personally have never more than 1% at risk per trade, and never more than 7% of the entire portfolio.
  • #7
  • Jul 24, 2007 3:12pm Jul 24, 2007 3:12pm
7% of entire profolio at one time in trades??
please explain.


thanks

Quoting shrike
Wrong question in my opinion. The question should be: "How much risk am i willing to take in my portfolio at any one time?"

Its perfectly possible to have your 10-15% in used margin, but near zero risk in terms of market-movement (in the case your positions have developed in your direction, and your stops are at break-even or better).
Its also possible to have just a 3% margin used figure, but have a very high percentile of your account-value (or even more than that) at risk (in the case your stops are very far away, or you dont use stops at all). It makes much more sense to track your risk, rather than just use a hard percentile of your account money. I personally have never more than 1% at risk per trade, and never more than 7% of the entire portfolio.
  • #8
  • Jul 24, 2007 3:27pm Jul 24, 2007 3:27pm
Quoting newjersey24
7% of entire profolio at one time in trades??
please explain.


thanks
Sorry, the last words should have read: 7% of my account value at risk.

For example, say i have $10000 in my account. I go long 50000 EUR/USD, and enter a stoploss 20 pips away. If i get stopped out, i loose 100$, thats 1% of my account, so i risk 1%. If i enter 6 additional simmilar trades at the same time, i risk 7% of my account.
If later all 7 trades move in my direction, and i can move my stops to break-even or further, i have 0% at risk, and could enter more trades.
  • #9
  • Last Post: Sep 21, 2014 2:10pm Sep 21, 2014 2:10pm
Number 1 Money Management Rule of Thumb:

Nomatter how good and sure the trade is never risk more that 2% of your capital on one single trade
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