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Stop Loss and Risk per Trade

  • #1
  • First Post: Jun 28, 2010 6:58am Jun 28, 2010 6:58am
There are probably already a million threads like this, so im sorry for recreating but i thought it would be better because it would answer my questions more specifically.


My question is how much of your trading capital do you risk per trade I have read a few books and most of them say 1%-2%, 2% being on the aggressive side?



Also if you get stopped out and then the market reverses, where do you re-enter, would it be at the same price as your first trade? The next question might depend on what kind of strategy you have but how many times would you retry this until you stop trading?
  • #2
  • Jun 28, 2010 7:32am Jun 28, 2010 7:32am
Trading capital risk per trade: 3%
I have a maximum of 3 trades at once (though quite rarely)
Max risk at any given time is 9%

I trade on a long time frame (4 hours) My average stop is about 100-120 pips wide. If it gets stopped out, it means I was wrong on my direction. I rarely re-enter in the same direction. Most of the time I'll be waiting to see if a new signal comes.

From my above statement you can see that I rarely place trades. Which is kinda true. On an average month I place about 10-20 trades at most.
  • #3
  • Jun 28, 2010 9:22am Jun 28, 2010 9:22am
Got a question for you thelws.

With a Stop of 100-120 pips. How many pips do you aim to make each trade. Do you have a set amount or close the trade when you think the direction will reverse?
  • #4
  • Jun 28, 2010 11:18am Jun 28, 2010 11:18am
Hmm.... I guess it very much depend on our own plan.

For me, my risk profile varied from1 to 5 %.

Maybe that makes you wondering, why 5. Well, for sometime when you only have small account, you'll need to take that to have adequate stop. But then again, that's for me. Maybe not for you.

With that risk profile, my serious trade mainly in middle to long term (Weekly then price examining at hourly). My other trade in small time frame, I used 15 or 30 to look at the setup and 5 to price examining. But the small one, I really treat it as small. I used smallest risk profile there (sometime even smaller).

For taking opposite position, I prefer to calculate a lil' while if I have to take that position. (There's many thing to consider, mate. Including : spread, trend's strength, your own psychological condition, etc.)
  • #5
  • Jun 28, 2010 3:52pm Jun 28, 2010 3:52pm
You cannot know all threads on the forum. It is OK to ask about anything. I do it the way running strategy tester and see how many consecutive losses and wins and by this way decide something.
Quoting madetrader
There are probably already a million threads like this, so im sorry for recreating but i thought it would be better because it would answer my questions more specifically.


My question is how much of your trading capital do you risk per trade I have read a few books and most of them say 1%-2%, 2% being on the aggressive side?



Also if you get stopped out and then the market reverses, where do you re-enter, would it be at the same price as your first trade? The next question might depend on what kind of strategy you have but how many times...
The more experience the closer to the reality
  • #6
  • Jun 28, 2010 4:26pm Jun 28, 2010 4:26pm
Hi fellows,

I risk between 1% and 5% on a single trade, depending entirely on the situation. Every trade is a unique independent event.

I usually never place more than 2 simultaneous trades.
  • #7
  • Jun 28, 2010 9:30pm Jun 28, 2010 9:30pm
Quoting Underlord
Got a question for you thelws.

With a Stop of 100-120 pips. How many pips do you aim to make each trade. Do you have a set amount or close the trade when you think the direction will reverse?
The answer to that is rather subjective. Let me explain:
1)I have no specific take profit levels. I use a trailing stop as my gauge.
2)Sometimes I close the position if I think the direction will reverse. However, I trade on 4 hour tf. It doesn't happen that often. A position might take a few days to develop(or reverse). But on average, I make 1.5-2 times more than my initial risk.

3)If I have to take profits prematurely, I try to get at least a 1:1 risk:reward ratio. Otherwise, I just take what I can get. But more often than not, I only exit when there is a signal to exit.

I mentioned this a few times, but let me mention it again - I rarely get signals to enter. That means I rarely get signals to exit either. I'm a trend follower. My average trades last for about 1day to 2 weeks long. Understanding that is important.
  • #8
  • Jun 29, 2010 11:15am Jun 29, 2010 11:15am
after losing an account i learned my lesson: 1% per trade is the way to go. Forex is not a get rich quick scheme, as isn't poker. I have made the same mistakes in poker now, as i've made in forex trading at first(I only started playing online poker, and lost my aprox. $400 just like that). Just like my first forex account. i just don't learn
Twitter: @forexpokerpro
  • #9
  • Jul 4, 2010 9:56pm Jul 4, 2010 9:56pm
Stop usually is between 1%-2% with TP at around 3%-5%
  • #10
  • Jul 5, 2010 1:41am Jul 5, 2010 1:41am
I personally risk 0.2% of my account equity per trade. With a maximum of 5 trades open at any one time, I never have more than 1% of my account at risk. The more capital I have to trade with, the less I need to make in order to live a good life. When I started trading I risked 1% per trade (only a maximum of 2 open trades at a time...so 2% total risk) in order to make the returns worthwhile for me. As my account has grown, I can reduce my risk substantially, and still make more as a dollar amount each month.

My strategy is very much based on reacting to the market direction rather than trying to predict where it is going to go in the future, and therefore I will enter and exit multiple times per day. My stop loss is extremely tight, and I trail it manually based on swing points and personal discretion....I have no set or even rough profit targets. If I go long, I will stay in the trade for as long as the price continues to make new swing highs and vice versa.

I will keep entering and exiting trades from around 8am - 3pm UK time, or until I am happy with my profits or feel I have lost enough for one day.
  • #11
  • Jul 8, 2010 10:07am Jul 8, 2010 10:07am
The 1% - 3% rule is not for everyone.

For one thing, it depends on the frequency of your trading. For example, if I only trade once per year, what good is it to risk only 1%? Why not risk 5% or even 10%? Common stock portfolios lose this much all the time.

The other factor is how much your strategy loses. Some people have trading strategies that lose 40% of the time. In this scenario, it makes sense to only risk 1% per trade because your losing streaks are more common. However, if you have a trading strategy that only loses 10% of the time, then the whole dynamic of how much to risk is changed.

Third, it all depends on your tolerance for risk aka what kind of money you are trading. I may choose to flip some Forex money, by risking 50%, as opposed to risking the same money on equivilant lottery tickets. The Forex can be used like a savings account, with the goal of earning 3% per year or as a high probability betting system. Naturally, money that is to be used as high probabilty money is discretionary money, it should not be your rent money.

However, if you are new to Forex, I would encourage you to be as conservative as possible. It takes at least 3 years of live trading experience before my above information applies to you.


As for your stop loss, most successful spot Forex traders that I know of use 300 - 450 pips on any given pair, with a TP that is between 50 - 100 pips. (I don't deal in stops because I only trade Binary Options.)
Binary Options Trader
  • #12
  • Jul 11, 2010 12:09am Jul 11, 2010 12:09am
To keep things simple, My personal take will be to look at the number of pips you can afford to lose. That will help you define what kind of trading style or strategy you carry..

For example, if you can afford to loose only 20-25 pips per trade, then day trading is your best option. If you can afford more, then day trading and swinbg trading both may work out.
  • #13
  • Jul 11, 2010 4:05am Jul 11, 2010 4:05am
It makes absoultely no sense to risk 1% on one trade and x% on another.
Let's say you are confident that your next trade will end up positive (which is a very noobish thing to do) and you risk 3% and you get stopped out. Now you're pissed because the market didn't do what you expected. With your next trade you risk only 1% because you're afraid of losing now. It turns out to be a huge winner. To bad you fiddled with your risk settings because you could have covered your previous loss if you only kept your risk steady.

How much you should risk should be related to how your strategy performs if your winrate is very high and your average loss is way smaller than your average win you should risk more than with a very low winrate because this would result in more draw down. Makes perfect sense doesn't it? If you win evey trade "theoretically"? Why risk risk only 1%? To maximize your results you should risk everything because your not going to lose anyway. If your winrate is 0% you should of course risk 0% on every trade because every thing else would make yo lose money.

A very usefull thing to do this is :
http://www.hquotes.com/tradehard/simulator.html
Make sure you have a few hundret live trades under your belt and now look up your winrate and your avg Win/Loss Ratio. Put it in there and set Lines Qty to 10.000 meaning that it will generate 10K theoretically equity curves.
The kelly valuve gives you your optimum risk. For winrate 0.37(37%) and 2.87 Win/Loss Ratio you should risk 0.150 (1.5%). Your math expectancy shows you if your system losses moneny (value < 0) or wins. With 0.431 you get 43,1 Cents for every dollar risked. If you min value is 68 that means (100-68 = 32) you have a 1:10.000 Chance of a 32% Draw Down.
  • #14
  • Jul 12, 2010 2:35pm Jul 12, 2010 2:35pm
Quoting TJPLD
It makes absoultely no sense to risk 1% on one trade and x% on another.
Every trade or trade opportunity is independent, and it's not a bad idea to learn how to treat it as such. The odds change from one moment to another.

Risking a set percentage on every trade is the standard and recommended thing to do, especially if you do have a set strategy/system. As a 100% discretionary trader (with an edge) however, you realize that your edge is not a static value (due to the nature of the market itself), it fluctuates from one opportunity to another depending on how good the opportunity is. Once you begin to see this and once you develop the ability to objectively estimate the quality of each/most opportunity you encounter, it's not bad to adjust your risk % accordingly (with the latter never going above a set maximum % you are willing to risk on any single trade).

Quoting TJPLD
It makes absoultely no sense to risk 1% on one trade Let's say you are confident that your next trade will end up positive (which is a very noobish thing to do)
If one is at a level where he still believes/expects such things, the only % he should risk is 0%.

It's not about "expecting the next trade to be a winner", one should never have such expectations. It's about reacting to how strong the current opportunity that is happening now is.

Just my 2 pips worth.
  • #15
  • Jul 12, 2010 5:29pm Jul 12, 2010 5:29pm
Quoting Marv
Every trade or trade opportunity is independent, and it's not a bad idea...
No matter how good you think the opportunity is even if you know for sure that a certain setups givs you a 80% probabilty. You never know if the next 20 setups will be a loser and after that 80 winners. That is absolutly possible so there is no sense in risking diffrent percetantages just because you belive there is "an opportunity". You don't know anything as a trader.
  • #16
  • Edited Jul 13, 2010 11:06am Jul 12, 2010 9:42pm | Edited Jul 13, 2010 11:06am
Quoting TJPLD
You don't know anything as a trader.
About the future? You're absolutely right, I don't.

Quoting TJPLD
No matter how good you think the opportunity is even if you know for sure that a certain setups givs you a 80% probabilty. You never know if the next 20 setups will be a loser and after that 80 winners.
You are right, but you miss a few things:

1) I don't alter the risked % based on previous trades (that would be a form of gambler's fallacy), only the current opportunity as best as I can see it.

2) I don't believe in "setups". My humble experience with the market tells me that a particular setup may work today but might not work next week.

3) Mathematically, if you can correctly estimate the quality of trading opportunities more often than not, then adjusting your risked % accordingly will improve your return in the long run. If not, then your long-term risk % per-trade would just equal the average of all the different percentages you've risked on all trades (due to random distribution of wins/losses).
  • #17
  • Jul 13, 2010 12:46am Jul 13, 2010 12:46am
Quoting Marv

2) I don't believe in "setups". My humble experience with the market tells me that a particular setup may work today but might not work next week.
I think I have to question this. Are you saying you just enter the market arbitrarily? Surely not? Did you mean to say "I don't rely on set ups to play out."?
Gone to a better place
  • #18
  • Jul 13, 2010 11:15am Jul 13, 2010 11:15am
Quoting smikester
Are you saying you just enter the market arbitrarily?
Absolutely not. I try to be very selective with my trades. I just don't wait for "mechanical setups", if you wish. For me, it's a waste of time, the price is not a 1+1=2 mechanism.

No systems, no indicators, no setups, no nothing. Just pure price and an objective mind.
  • #19
  • Jul 13, 2010 1:16pm Jul 13, 2010 1:16pm
Quoting Marv
Absolutely not. I try to be very selective with my trades. I just don't wait for "mechanical setups", if you wish. For me, it's a waste of time, the price is not a 1+1=2 mechanism.

No systems, no indicators, no setups, no nothing. Just pure price and an objective mind.
And are you profitable?
  • #20
  • Jul 17, 2010 10:19pm Jul 17, 2010 10:19pm
Quoting petertrader
And are you profitable?
I sure hope so!
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