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How Much Do You Risk Per Trade?

  • #1
  • First Post: Jun 11, 2009 1:12pm Jun 11, 2009 1:12pm
Hello everyone! I copied this thread from another forum cause I think is very interesting to discuss.

a) Less than 1%
b) 1%
c) 2%
d) 3%-5%
e) 5%-10%
f) more than 10%
g) I am still demo trading

I myself risk no more than 10%: enough to make a decent profit but not that much that will leave me naked.
Regards!!!
  • #2
  • Jun 11, 2009 2:14pm Jun 11, 2009 2:14pm
10% risk per trade? In my eyes, this is very much.
After one loss, 90% of your initial capital remains. When you have 6 losses in a row, you lost nearly half of your capital.

I usualy risk 1-2% per trade. Maybe it would be a better idea to start this thread as a poll?
  • #3
  • Jun 11, 2009 2:32pm Jun 11, 2009 2:32pm
no more than 2% and I am happiest at 1% or below. If I risk more, I trade worse. I can sometimes pull in front by 10% in a single session, while a 2-3% draw is as bad as it gets for me. I am considering cutting risk to a flat .5% as the best way to further improve my results
BTC Return This Year: na
  • #4
  • Jun 11, 2009 2:33pm Jun 11, 2009 2:33pm
0.5-3% depending on strategy and some other elements.
  • #5
  • Jun 11, 2009 2:42pm Jun 11, 2009 2:42pm
Quoting mikkom
0.5-3% depending on strategy and some other elements.
I agree, it does have to depend on the strategy, time of day (low or high liquidity), S&R. But never more than 3% in total, on all trades.
  • #6
  • Jun 11, 2009 2:48pm Jun 11, 2009 2:48pm
I find this question a little irrelevant to be quite honest. The risk you use should be defined by your success rate and the potential drawdown based on past history of your trades.

The answers you receive on this post are fairly meaningless without the context of the performance of each trader.

As an example, if I traded 90% success, with a minimum risk:reward of 5, then I would certainly be trading a large portion of my account, perhaps 20% or more, and concievably this would be good money management.

However if my performance was 50% for the above, then I would be foolish to be trading 20%.

You cannot base your risk on anything other than your own performance and any newbies to this thread should go and get educated in this critical area before thinking they can do what everyone else does!
June 09, account growth so far this month 27%
  • #7
  • Jun 11, 2009 2:50pm Jun 11, 2009 2:50pm
1 -3% are good enough to make me able to set my trade and shut off the screen for some time .... that's my best definition of MM (stolen from Clockwork71....)

Risking 10%.... I've done that before... in a row of losing trades you finish right off the market... but... that's just my opinion... I think that every trader must feel comfortable with its own MM, since it fits your style, that's oK...

Cheers!

HT
Many share my views with me. But I don't share them with them...
  • #8
  • Jun 11, 2009 4:43pm Jun 11, 2009 4:43pm
Quoting happyaslarry
I find this question a little irrelevant to be quite honest. The risk you use should be defined by your success rate and the potential drawdown based on past history of your trades.

The answers you receive on this post are fairly meaningless without the context of the performance of each trader.

As an example, if I traded 90% success, with a minimum risk:reward of 5, then I would certainly be trading a large portion of my account, perhaps 20% or more, and concievably this would be good money management.

However if my performance was 50% for...
In some kind, I agree with you. From a mathematical point of view, this makes sense. My success rate is about 75% and I have a risk:reward of 1:1.2 This works fine for me so far, and I am working on improving my risk/reward ratio.

However, with bigger positions I don't feel as comfortable as with smaller once. I cannot trade in the same manner and I am not as relaxed as I am with small positions - this may be different for other trades, though.

But, even with a 90% success rate, the time will come where you have 3 losers in a row - and 3 losers of 20% each will result in a drawdown of 50%. Sure, on the other hand, the profits are great - if you have one winning position, you more than double your account - if risk:reward ratio is 5.
  • #9
  • Jun 11, 2009 4:52pm Jun 11, 2009 4:52pm
Quoting happyaslarry
I find this question a little irrelevant to be quite honest. The risk you use should be defined by your success rate and the potential drawdown based on past history of your trades.

The answers you receive on this post are fairly meaningless without the context of the performance of each trader.

As an example, if I traded 90% success, with a minimum risk:reward of 5, then I would certainly be trading a large portion of my account, perhaps 20% or more, and concievably this would be good money management.

However if my performance was 50% for...
Good reasoning.
It depends also on your system time frame.
I play up to 20% of the capital when needed.
I don't hold long term trades.
Working well so far.
  • #10
  • Jun 12, 2009 9:04am Jun 12, 2009 9:04am
I didn't actually post my stats, I was just giving an example out of thin air to try to make a point.

I prefer to trade in a very relaxed way, choose my direction in the morning and go for some big points with not much hassle in between. As a result I get a 50:50 win/loss however my risk:reward is large. I am a trend trader, so on trade entry I have no idea what my risk:reward is, I can only control my risk and run my reward. My trade history tells me what my average risk:reward is, but this is after the event not before.

The strategy I use doesn't even lend itself to defining a % risk as I hedge, so for me this question is not answerable. I base my contract size on historic drawdown and correlate that with market volatility and possible big news expected.

So, If you consider each trade individually I could actually be trading a max of 1 lot for each 10k of my account, but in actual fact my risk is closer to 1/5th of that due to correlation. Complex to figure out,but easy and profitable to trade!

Again, I guess I have complicated this - just want to point out another popular miss-conception, you don't need to know the risk reward when you run your trades for as much as you can - you just need to build up your stats and monitor your performance.
June 09, account growth so far this month 27%
  • #11
  • Jun 12, 2009 1:54pm Jun 12, 2009 1:54pm
I think it depends on a number of factors.

1. How much of your total assets are in your account? If you have 1% of you net worth in an account and you risk 10% of your account on the trade, you may not be risking that much.

2. Is it easy to replace what you lose? Do you have an outside source where you can replace the money in the account if you blow it.

Let's assume you can't replace your account easily if you blow it. My recommendation for a new trader is to trade 1% or less of your account. If you lose 10 trades in a row, you are still in the game. Trading can be streaky so your risk management should reflect that.

3. What's your risk tolerance? Do you get emotionally attached to a trade with more money on it? Make sure you don't risk so much that your emotions dictate to you more what to do than price does.

If you talk to professional traders (i.e. the guys that make a full time living trading the fx market) you will find they risk somewhere between 1% and 5% per trade. Mostly they will risk 1% or less. On a rare occasion they will risk more. Talk to a fund manager (i.e. CTA) and they will tell you they risk around 0.25% per trade.
  • #12
  • Jun 12, 2009 4:45pm Jun 12, 2009 4:45pm
Hi,

kindly remind me the formula for calculating lots-size taking into consideration the stoploss and intended percentage risk.

Thanks.
  • #13
  • Jun 12, 2009 6:05pm Jun 12, 2009 6:05pm
Quoting watchout4me
Hi,

kindly remind me the formula for calculating lots-size taking into consideration the stoploss and intended percentage risk.

Thanks.
Example:

Capital: $10.000
Risk: 1% per trade, which equals $100

Currency pair is EURUSD, so 1.00 standard lot is $10 per pip.

Your stop loss is 50, so if you want to risk $100, each pip may be worth $100 / 50 = $2.

When 1.00 standard lots is woth $10 per pip, you have to open a position of size 0.20 lots. Then each pip is worth $2 and you lose $100 if you get stopped out after 50 pips.
  • #14
  • Jun 12, 2009 6:37pm Jun 12, 2009 6:37pm
Pnf-trader, thank you for the insight.

Pnf-trader or anyone,

My trading account is in £ not $.

I know, 1.00 standard lot is $10 per pip.

How do I calculate the pip value in £, is it by using the exchange rate of the day?



Quoting pnf-trader
Example:

Capital: $10.000
Risk: 1% per trade, which equals $100

Currency pair is EURUSD, so 1.00 standard lot is $10 per pip.

Your stop loss is 50, so if you want to risk $100, each pip may be worth $100 / 50 = $2.

When 1.00 standard lots is woth $10 per pip, you have to open a position of size 0.20 lots. Then each pip is worth $2 and you lose $100 if you get stopped out after 50 pips.
  • #15
  • Jun 12, 2009 7:18pm Jun 12, 2009 7:18pm
Quoting kelly
Hello everyone! I copied this thread from another forum cause I think is very interesting to discuss.

a) Less than 1%
b) 1%
c) 2%
d) 3%-5%
e) 5%-10%
f) more than 10%
g) I am still demo trading

I myself risk no more than 10%: enough to make a decent profit but not that much that will leave me naked.
Regards!!!
If you have an edge ( a real one not something based on TA) then you should be trying to get 90-95% and therefore risking 10-15%
Economists have forecast 9 out of the last 5 recessions
  • #16
  • Jun 12, 2009 8:30pm Jun 12, 2009 8:30pm
Almost never more than 2%. Usually 1%.
freedom
  • #17
  • Jun 13, 2009 7:12am Jun 13, 2009 7:12am
Quoting kelly
Hello everyone! I copied this thread from another forum cause I think is very interesting to discuss.

a) Less than 1%
b) 1%
c) 2%
d) 3%-5%
e) 5%-10%
f) more than 10%
g) I am still demo trading

I myself risk no more than 10%: enough to make a decent profit but not that much that will leave me naked.
Regards!!!

hello everyone

I think so i shuld go for option "D", because 5% risk is enough for every trader and if you are capable to take risk more thatn 5% ,so i suggest you that still don't take risk more that 5%. and also it is denpend on risk reward ratio, if you are looking for more reward so you have to enter in riasky trade, but always your risk should be 1/3rd of your reward.


Ok
  • #18
  • Jun 13, 2009 9:20am Jun 13, 2009 9:20am
Quoting jmw
I think it depends on a number of factors.

1....
jmw, indeed, you have a pretty good point... Nice post!

Cheers
HT
Many share my views with me. But I don't share them with them...
  • #19
  • Jun 13, 2009 1:27pm Jun 13, 2009 1:27pm
Quoting happyaslarry
I find this question a little irrelevant to be quite honest. The risk you use should be defined by your success rate and the potential drawdown based on past history of your trades.

The answers you receive on this post are fairly meaningless without the context of the performance of each trader.

However if my performance was 50% for the above, then I would be foolish to be trading 20%.

You cannot base your risk on anything other than your own performance and any newbies to this thread should go and get educated in this critical area before...
I second that....it entirely depends upon your strategy. If you underleverage just to do what the crowd is doing than check if it is worth the time. I know scalpers who risk 80-90 % their a/c and are comfortable with it. And there are people who deal in terms of overall DD of a/c and not in individual trade risk (because they vary the lot size drastically depending upon the opportunity). You should be flexible enough to make the most of a good opportunity & with a effective stop strategy it will not be as harmful as many think.
The only way to get smarter is by playing a smarter opponent.
  • #20
  • Jun 13, 2009 1:41pm Jun 13, 2009 1:41pm
Hi All,

What's risk and how does it apply here. Risk is not the amount you are using to buy or sell. It's the amount you're put on your sell stop.

Trade well and prosper,

Johnny
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