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How Much Do You Risk Per Trade?

  • #41
  • Jun 18, 2009 4:15pm Jun 18, 2009 4:15pm
1-2% is ok, 10% is too much, you will blow up your account soon
  • #42
  • Jun 20, 2009 7:59am Jun 20, 2009 7:59am
Quoting Arturs
1-2% is ok, 10% is too much, you will blow up your account soon
Not if you have a good winning % and experience. With 80-90% winning % and decent R/R it's almost impossible to blow one's account when risking 10% per trade of the current capital.
  • #43
  • Jun 20, 2009 5:19pm Jun 20, 2009 5:19pm
Correct FX-Junior, but majority of traders would have psychological issues trading 10% of their account which would effect their ability to trade their strategy - this would then cause their Stats to go from 80 to 90% down to maybe 70% and also they will start to lose confidence and all manor of bad habits effecting traders would kick in.

I however do on occasions risk 10%, but that is only when I have a great potential opportunity, I am also fortunate to have got my emotions in check - but I would NOT advise any inexperienced traders to do this.
June 09, account growth so far this month 27%
  • #44
  • Jun 20, 2009 6:55pm Jun 20, 2009 6:55pm
Quoting fx-Junior
Not if you have a good winning % and experience. With 80-90% winning % and decent R/R it's almost impossible to blow one's account when risking 10% per trade of the current capital.
With an 80% win rate and 1:1 RR, and one trade per day, one should be able to safely turn 10K into 1M within 12 months. 10,000% per year? Consistently? Welcome to the Forbes list.
  • #45
  • Edited 9:27pm Jun 20, 2009 9:24pm | Edited 9:27pm
Don't make fool out of yourselves. Fx trading for retailers is all about numbers. You are small fish in this ocean that is full of sharks. You will achieve success if have your numbers right.

Do not even think about more than 1% risk on all your positions at any given point of time, unless you are looking for a failure because of your greed. 0.25% to 0.5% should be the normal risk, 1% should be in extreme cases.

You may have to wait days or weeks to find a good setup that provides an opportunity of 1:3, or 1:4 or even 1:5 risk:reward. With 0.25% risk, your sl may get hit several times e.g. three or four times before a trade finally goes in your desired direction. Market will seldom go straight in your desired direction from your entry point. If you are lucky, on an average, it will produce (3%-[0.25% x 4]) = 2% retrun on every 1% lost.

If you lose 20%, it will require earning 25% on your balance equity just to break-even i.e 20/80 = 25%. And if you lose 50%, you will have to earn 100% to make-up for that lost 50%.

They key is to make several attempts each time risking a small % of your equity in order to catch a big move. Once you are right, you may like to take some more risk by adding to your winning position.
The Thief of Wall Street
  • #46
  • Jun 21, 2009 12:28am Jun 21, 2009 12:28am
Quoting markmm
I think you are mixing up, Leverage and % of account risked. If you mean these traders risk 80-90% of their account per trade then I find that very hard to believe.
No I am not mixing up....guess should explain a lil more....

Many scalpers I know have a common practice, they have multiple accounts. They use one account for scalping, this account have just enough margin that makes up to their daily trading limit. These fellows have a daily drawdown limit which they decide before hand at start of their trading day. Once this limit is reached they stop trading and analyze their mistakes.
Now this account size is just big enough to have their daily limit + some more. So they are risking around 80-90 % per trade because one trade can cross they daily loss limit if they do not execute well. Before next trading day they settle their accounts adding/remove equity. Keeping the account size already low is protection for any unusual hazard and other accounts can gain steady interest.
The only way to get smarter is by playing a smarter opponent.
  • #47
  • Jun 21, 2009 3:51am Jun 21, 2009 3:51am
Quoting NewFX
No I am not mixing up....guess should explain a lil more....

Many scalpers I know have a common practice, they have multiple accounts. They use one account for scalping, this account have just enough margin that makes up to their daily trading limit. These fellows have a daily drawdown limit which they decide before hand at start of their trading day. Once this limit is reached they stop trading and analyze their mistakes.
Now this account size is just big enough to have their daily limit + some more. So they are risking around 80-90 % per...
Ah I see now, makes sense. The alternative of this would to use stops however this way avoids risks such as the stop being slipped or the trader making an order entry error, they can only lose a certain amount.
Economists have forecast 9 out of the last 5 recessions
  • #48
  • Jun 21, 2009 3:56am Jun 21, 2009 3:56am
Quoting Chicky
Don't make fool out of yourselves. Fx trading for retailers is all about numbers. You are small fish in this ocean that is full of sharks. You will achieve success if have your numbers right.

Do not even think about more than 1% risk on all your positions at any given point of time, unless you are looking for a failure because of your greed. 0.25% to 0.5% should be the normal risk, 1% should be in extreme cases.

You may have to wait days or weeks to find a good setup that provides an opportunity of 1:3, or 1:4 or even 1:5 risk:reward. With...
I agree with this if you are new to trading, however once your hit rate is in the 90% range then it would be fine to push the % up to 10%. I suppose if your hit rate stays close to 50% then you are going to have to trade this way or blow your account.
Economists have forecast 9 out of the last 5 recessions
  • #49
  • Jun 21, 2009 4:58am Jun 21, 2009 4:58am
Quoting markmm
I agree with this if you are new to trading, however once your hit rate is in the 90% range then it would be fine to push the % up to 10%. I suppose if your hit rate stays close to 50% then you are going to have to trade this way or blow your account.
Exactly. Hit rate being 90%, there will be three losses in a row every 3000 trades, and that means 28% drawdown risking 10%, witch is not that much I think. Risking 0.25% or 0.5% it's hard to make it in the big money if you start with small capital. But yes, it's all about the one's personality, trading style and experience defining how much it's wise to risk.
  • #50
  • Jun 21, 2009 11:48am Jun 21, 2009 11:48am
Quoting markmm
I agree with this if you are new to trading, however once your hit rate is in the 90% range then it would be fine to push the % up to 10%. I suppose if your hit rate stays close to 50% then you are going to have to trade this way or blow your account.
Thanks markmm, I am far far away from 90% hit rate and doubt it is achievable ever on a consistent basis, no matter for how many centuries one is trading. The reason is simple, there are so many volatile and variable factors affecting currency prices. Yes, one can achieve 90% hit rate with unlimited capital using a martingale method, but those methods sooner or later get to their logical end. An experienced trader may like to take 10% or even more risk on selected trades based on level of confidence, inside information, accumulated earnings, etc. but to have 10% as standard risk would definately be a recipe for disaster. An average trader may look for a way of making consistent profits with a conservative 50% hit rate. Please do remember that many new traders read these posts and trade with their hard earned moneys and mental capital.
The Thief of Wall Street
  • #51
  • Jun 22, 2009 7:00am Jun 22, 2009 7:00am
Quoting fx-Junior
Exactly. Hit rate being 90%, there will be three losses in a row every 3000 trades, and that means 28% drawdown risking 10%, witch is not that much I think. Risking 0.25% or 0.5% it's hard to make it in the big money if you start with small capital. But yes, it's all about the one's personality, trading style and experience defining how much it's wise to risk.
Correct, if only the world was full of statistical certainties, that would be great. Unfortunately those 3, 4, 5 etc lossers in a row could happen tomorrow or in 10 years - but as the great traders we are, we have all obviously accounted for the almost worst case situation and chosen our risks accordingly.
June 09, account growth so far this month 27%
  • #52
  • Jun 22, 2009 7:10am Jun 22, 2009 7:10am
It depends on your exit-strategy
  • #53
  • Jun 22, 2009 7:20am Jun 22, 2009 7:20am
Quoting Chicky
Thanks markmm, I am far far away from 90% hit rate and doubt it is achievable ever on a consistent basis, no matter for how many centuries one is trading. The reason is simple, there are so many volatile and variable factors affecting currency prices. Yes, one can achieve 90% hit rate with unlimited capital using a martingale method, but those methods sooner or later get to their logical end. An experienced trader may like to take 10% or even more risk on selected trades based on level of confidence, inside information, accumulated earnings, etc....
There are other methods that can achieve a high hit rate, but they wont appear in the methods forum.
Economists have forecast 9 out of the last 5 recessions
  • #54
  • Jun 22, 2009 7:42am Jun 22, 2009 7:42am
Quoting markmm
Ah I see now, makes sense. The alternative of this would to use stops however this way avoids risks such as the stop being slipped or the trader making an order entry error, they can only lose a certain amount.
No it doesn't, accounts can go negative so it's not different in any way to using stops.

If you don't believe this, read your broker contract - ever wondered why they always ask your net worth and other seemingly irrelevant questions? [note that I'm not claiming it's easy to get negative, in fact it's very hard but it's possible]
  • #55
  • Jun 22, 2009 7:45am Jun 22, 2009 7:45am
Quoting mikkom
No it doesn't, accounts can go negative so it's not different in any way to using stops.

If you don't believe this, read your broker contract - ever wondered why they always ask your net worth and other seemingly irrelevant questions [note that I'm not claiming it's easy to get negative, in fact it's very hard but it's possible]?
Read up on Margin Calls.
Economists have forecast 9 out of the last 5 recessions
  • #56
  • Jun 22, 2009 10:13am Jun 22, 2009 10:13am
Quoting mikkom
No it doesn't, accounts can go negative so it's not different in any way to using stops.

If you don't believe this, read your broker contract - ever wondered why they always ask your net worth and other seemingly irrelevant questions? [note that I'm not claiming it's easy to get negative, in fact it's very hard but it's possible]
Can you please provide an example?
The only way to get smarter is by playing a smarter opponent.
  • #57
  • Jun 22, 2009 10:18am Jun 22, 2009 10:18am
I enjoy trading, and so I rarely risk more than 1% of my vast capital reserves on a trade.

This allows me to take other trades as set ups arise.

I do not get over excited/confident when I see my winning trades piling up cash.

In the same way, I don't kick the dog if I make a mistake. (If I had a dog).
Gone to a better place
  • #58
  • Jun 22, 2009 10:25am Jun 22, 2009 10:25am
Quoting markmm
Read up on Margin Calls.
Do you really think I don't know what that is?
  • #59
  • Jun 22, 2009 10:57am Jun 22, 2009 10:57am
Quoting mikkom
Do you really think I don't know what that is?
How then can your account go into negative, your positions will be liquidated before your account is wiped, by the margin call. Unless there is a massive order that clears the complete orderboard or a liquidity vacuum.
Economists have forecast 9 out of the last 5 recessions
  • #60
  • Jun 23, 2009 2:45pm Jun 23, 2009 2:45pm
Believe me, although it has never happened to me because I don't trade kamikazee it is absolutely possible to go negative on your account and you are accountable for that.

Take the situation where the market goes crazy, moves and even gaps during a fast event. Dependent on your broker and the amount of leverage they give vs the margin required you CAN certainly go negative.

You will also see this in your terms and conditions (small print) - possibly all this will vary amongst brokers and the better the broker you are with the less leverage and greater margin will be required, thus forcing people to trade with some risk control and imposed protection.

On to the other subject - why on earth would anyone empty their account to limit their losses - if you ask me those traders need to examine their psychology and control/discipline. If you have this in check you dont need to put in these measures. I agree that a max loss per day is a good thing to have. Also the logic around these traders trading 90 to 100% of their account is ludicrous, I think what was meant that they decide on their max loss and then trade upto 90 to 100% of the max loss - which is totally different as this max loss may still be just 3% of their total available funds.

To all newbies out there, if you have to put measures in place to control your max loss then you need to go and get your mind trained before continuing to trade. Its like putting a chastity belt on your wife because you don't trust her. Instead you should examine the cause of the relationship problems and overcome them - find and fix the causes, don't go treating the symptoms as you will never move forwards as a trader.
June 09, account growth so far this month 27%
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