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Stop Loss and Risk per Trade

  • #21
  • Jul 18, 2010 7:28am Jul 18, 2010 7:28am
Quoting Marv
I sure hope so!
The question is, how long...
  • #22
  • Sep 5, 2010 2:53pm Sep 5, 2010 2:53pm
I am a day trader, My max risk per trade is 1% max risk for a day is 3% I do good if I quit for the day when I reach (-3)%. Most of the time my greedy monkey will not let me quit and I have end up losing more than 10% and takes more days to recover the loss, Now when I have quit the day with (-3)% most of the times following day is a good day I have even covered the previous day loss and made a small profit.

My problem is I have to keep my self reminding to quit if I reach (-3)% risk for the day, Some days I have hard time stopping at (-3)% risk specially if I had continues winning prier to that day this could be over confidence of my self. To over come this problem I am thinking if there any brokers let you set max loss for a day? $$ amount or by %

If any one know any broker can support this please let me know or if any one have any idea how I can rewire my brain to stop when I reach (-3)% per day I appreciate that.
  • #23
  • Sep 5, 2010 3:12pm Sep 5, 2010 3:12pm
Quoting Forex Scan
I am a day trader, My max risk per trade is 1% max risk for a day is 3% I do good if I quit for the day when I reach (-3)%. Most of the time my greedy monkey will not let me quit and I have end up losing more than 10% and takes more days to recover the loss, Now when I have quit the day with (-3)% most of the times following day is a good day I have even covered the previous day loss and made a small profit.

[color=black][font=Verdana]My problem is I have to keep my self reminding to quit if I reach (-3)%...
Don't know if any broker offers this service. However, one may like to consider accounting profit/loss for a set of certain number of trades (10, 50, 100 trades, etc) and not in terms of days (or any other time-period). For my particular method, I find this basis of accounting logical. It also encourages me to wait for good opportunities and only take trades that have high probability of favorable outcome.
The Thief of Wall Street
  • #24
  • Sep 9, 2010 1:32pm Sep 9, 2010 1:32pm
What exactly people mean when they say MM?

Is it the guide to setting lot size, or SL level?

For example, 2% - is it the 2% of capital I use on each trade (lot size that equals to 2% of assets), OR is it the loss due to SL (2% of assets lost if I get stopped out on each trade) ?
  • #25
  • Sep 9, 2010 3:38pm Sep 9, 2010 3:38pm
Quoting Ayar
What exactly people mean when they say MM?

Is it the guide to setting lot size, or SL level?

For example, 2% - is it the 2% of capital I use on each trade (lot size that equals to 2% of assets), OR is it the loss due to SL (2% of assets lost if I get stopped out on each trade) ?
When you're risking 2% it means you'll lose 2% if the price reaches your stop level, which will be your maximum loss (unless you made add-on trades).

MM refers to choosing the lot size, the SL level depends on your analysis of the market. I got a formula in which I input the price of my stop and the amount I'm willing to lose and it returns the amount I should invest. So if I always risk 2% per trade, I'll be investing less when the stop loss is wide and I'll be investing more when the stop loss is tight.
  • #26
  • Sep 9, 2010 6:06pm Sep 9, 2010 6:06pm
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...
I suspect 95% of traders lose because they, along with other great trading philosophies, 'never risk more than 2% of their account on any single trade.'

When you sit down to think about it which do you think has a higher chance of success?
A Leaving 2% of your account to fend for himself and return 4% on a trade
or
B Using the full might of 100% of your account to try to make 2% on a trade.

My suspicious mind also tells me that the other 5% of traders have turned other conventional wisdoms on their heads! I have been thinking a lot about this 5% of traders...I want to join their club.

King.
  • #27
  • Sep 10, 2010 10:23am Sep 10, 2010 10:23am
Quoting Chicky
accounting profit/loss for a set of certain number of trades (10, 50, 100 trades, etc) and not in terms of days (or any other time-period).
Thanks for your response Chicky, I don’t think I understood your point. Can you elaborate how you calculate and what conditions you use? what is your exit strategy? If you win or lose do you keep trading until you reach the set number of trades?
  • #28
  • Sep 10, 2010 11:34am Sep 10, 2010 11:34am
I would like to say limiting 1% to 2% per trade risk is very important to reach that wealthy 5% traders club they would have taken there time to get where they are now. Now let’s see a regular person when I lose 1% or 2% I don’t feel bad losing because you know you could make this money back following trades or days. Some days I lose 10% I shouldn’t be losing that much for a day but my greedy monkey coursed that for the day now following day I have 99% of chance losing than winning because of the fear I build up thinking of losing again personally this is why I don’t like to take more than 3% loss a day if I think 3% is more to lose then I have to cut down more, This number will be a personal choice and depends on your trading strategy and what you can afford to lose, More money you have you may increase the risk but in money management view you have to look at how many time you can lose. I use compounded method so I can lose 69 trades in a row to wipe out 50% of my account (each trade -1%) , and I can lose 27days in a row to wipe out 50% of my account (if I lose -3 per day). Now lets see is there any strategy out there can make you lose 69 times in a row I hardly think there is a way you can find to lose 69 times in a row also remember reword have to be minimum 1% or more and your strategy have to have 50% chance or more winning

When I started trading before I start studying about money management I use to trade a method only using fibo lines targeting 138.2% line if its brake out of 100% line stop loss is 0% line this is 3:1 Risk reword if I lose more than 2 times out of 10 I don’t make any money this was a worse system I ever used and lost more money but back testing results showed you only lose 1 out of 9 so when you see 90% win rate it was attractive but its nothing because no reword in this system its 3:1 RR.

To become success good system with better than 1:1 risk reword and 1-2% risk per trade should take you there one day.

Happy forex trading
  • #29
  • Sep 15, 2010 6:29pm Sep 15, 2010 6:29pm
Would it be possible to just use a 1:2 risk reward ratio and put on a trade in the direction of the trend and expect to win overall. Not using any other indicators?

You win 2 a few times and you lose 1 a few times but you've traded with the trend so you have a better chance of winning more often .... so with that 1:2 ratio you should win at the end of the day? Is it that simple? has anyone tried that?
  • #30
  • Sep 16, 2010 6:04pm Sep 16, 2010 6:04pm
Quoting Bloosy
Would it be possible to just use a 1:2 risk reward ratio and put on a trade in the direction of the trend and expect to win overall. Not using any other indicators?

You win 2 a few times and you lose 1 a few times but you've traded with the trend so you have a better chance of winning more often .... so with that 1:2 ratio you should win at the end of the day? Is it that simple? has anyone tried that?
That is what we wish for. What we assume at face value. But...

When you add the spread, in most cases you are actually up against 3:1 chance of loss per trade even if the trade was to move in a straight line. Forex unfortunately does not move in a straight line. It is always retracing. Chances of hitting your loss before the take profit will more than square the RRR against u per trade. It does not work. Inverse risk reward ratio stands a better chance.

The trend? Forex is acqually retracing more than 70% of the time. Food for thought.

King.
  • #31
  • Sep 17, 2010 3:42pm Sep 17, 2010 3:42pm
Hi King Surfer


Quoting kingsurfer
Inverse risk reward ratio stands a better chance.
What does this mean?

Thanks
  • #32
  • Sep 17, 2010 6:30pm Sep 17, 2010 6:30pm
Quoting Bloosy
Hi King Surfer




What does this mean?

Thanks
Instead of the traditional 2:1 in your favour whenever you win, you are getting 1:2 or even less when you win. You rely on a much higher win rate to break even (or make profit). Scary!
  • #33
  • Sep 25, 2010 3:23am Sep 25, 2010 3:23am
The best way is to work out the trading plan. You have to take into consideration the following options:

1) How many trades you make a month
2) What is the average profit for each profitable trade
3) What is your deposit level
4) Do you trade only 1 instrument or you have the trading portfolio.

These will help you better understand the amount of SL level for each new trade.
  • #34
  • Oct 8, 2010 1:50am Oct 8, 2010 1:50am
Quoting TJPLD
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...
.150 is 15% not 1.5%
  • #35
  • Oct 8, 2010 2:00pm Oct 8, 2010 2:00pm
Quoting flotsom
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...
If your win rate is 60-70% with risk/reward ratio of 1:1 or 1:2, then risking 1-2% per trade is absolutely ridiculous. For a long time I was risking 50-67% per trade, but I have found that I had to continuously redeposit funds into my account. However, 2% is too conservative. I now am trading a practice account until I can shows steady returns. On my practice account, I risk 20% per trade and my account has been growing rapidly. Risking too little can be counterproductive. I have found that when I risk too little per trade, I tend to force trades. When I risk too much per trade, I tend to revenge trade. When I force trades or revenge trade, my win rate plummets. If I only risked 2% per trade, I wouldn't be satisfied with the returns because I would feel that I was not being adequately compensated for the work I do. If I risk a comfortable amount per trade, I am less tempted to force trades or revenge trade. 2% just doesn't work for me, but with 50%, I am not able to weather the storm if I have 5 losing trades in a row. Risking 20% per trade seems to work for me.
  • #36
  • Last Post: Oct 9, 2010 12:59am Oct 9, 2010 12:59am
Quoting Forex Scan
[color=black][font=Verdana]I would like to say limiting 1% to 2% per trade risk is very important to reach that wealthy 5% traders club they would have taken there time to get where they are now. Now let’s see a regular person when I lose 1% or 2% I don’t feel bad losing because you know you could make this money back following trades or days. Some days I lose 10% I shouldn’t be losing that much for a day but my greedy monkey coursed that for the day now following day I have 99% of chance losing than winning because of the fear I build up thinking...
I disagree that limiting risk to 2% is important to reaching that wealthy 5% traders club. If a person is winning 60-70% of the time with a 1:1 or 1:2 risk reward ratio, then risking 2% is far too conservative. I believe a person should be risking about 20% per trade if their win rate is that high. Risking too little is actually counterproductive because there is a greater temptation to force trades. Forcing trades will undoubtedly reduce a person's win rate. If a person is using 1:2 risk reward ratio and only wins 33% of the time, it doesn't matter how much they risk per trade. They will eventually blow their account. They will just blow it much more slowly. Generally a person is either good at playing the market, or they are not. The people who are good at playing the market will see their account barely grow at 2% per trade, and the people who are not good at playing the market will see their capital disappear regardless of how much they risk on each trade. My stop loss is about 1/2 percent from where I enter which means the number of pips is the market rate x 50. At Eur/Dol 1.40, my stop loss would be 70 pips. At 1.30 it would be 65 pips.
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