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5% risk per trade?

  • #41
  • Sep 9, 2015 11:18am Sep 9, 2015 11:18am
Quoting Xela
{quote} "It must be true: I read it at ForexFactory". Apologies for the facetious tone: no rudeness intended but please excuse the observation that the above is honestly one of the very most frighteningly, bizzarely inaccurate statements I've ever seen made in any trading forum. Nobody who's successfully trading for a living would ever dream, even in their worst nightmares, of accepting anything anywhere near that magnitude of drawdown among their trading methods!
LOL, well said..I guess at the end of it, one fifty cancels the other..and all that the trader gets for all the effort and midnight oil is a case of cramps in the largest muscle and wonky vision..
  • #42
  • Sep 15, 2015 7:23am Sep 15, 2015 7:23am
I have always had a 0.5% or 1% risk per trade. 5% is too much.
  • #43
  • Sep 16, 2015 1:58am Sep 16, 2015 1:58am
Yes the traditional methods taught us 1-2% risk per trade, if they have a sizeable account i.e. $5000 and above. For those that started with $100, then 2% won't see much change in the account. New traders will try to increase it to 5% per trade, that $5 they are willing to risk to enter a trade. If you have good R:R then why not. Be mindful of the drawdown.
  • #44
  • Sep 16, 2015 4:37am Sep 16, 2015 4:37am
in my opinion it is possible. lot of assumptions like edge (winrate, avg win size/loss size) staying the same all the way.

but say your equity is @ 10mil. then your position at 5% is 50k.@100 mil, 500k

can you trade the same even when you are risking a house every trade?

i think that's the question.
.
  • #45
  • Sep 16, 2015 5:45am Sep 16, 2015 5:45am
A % risk per trade is nonsense.

Let's assume you risk 5% per trade. That does not gurarantee you will make money with it. It's crap

95% of the traders lose on a long-term basis, why should you become one of the 5% winning traders with a strategy that risk just 5% per trade?
Forex is a losers game.
  • #46
  • Sep 16, 2015 7:27am Sep 16, 2015 7:27am
Quoting trader121
A % risk per trade is nonsense. Let's assume you risk 5% per trade. That does not gurarantee you will make money with it. It's crap 95% of the traders lose on a long-term basis, why should you become one of the 5% winning traders with a strategy that risk just 5% per trade?
I agree to some extent. If you can actually make consistent money then the size of the bet matters little.
.
  • #47
  • Sep 17, 2015 1:01am Sep 17, 2015 1:01am
For me the percentage per trade does not matter. I have a fixed dollar amount which I use as risk in every of my trade. Some times I do risk less or more than that amount but that has nothing to do with percentages.
  • #48
  • Sep 17, 2015 7:41am Sep 17, 2015 7:41am
Hi,

well to start off a 70% drawdown probably indicates a lacking stop loss, which is the first mistake in my eyes.

I always hear things like 1% aswell and they are totally reasonable when your trading amounts from 10.000$ onwards.

The main problem lies in classic retail trading where even 100% profit is not much money yet (I'm talking everything under 500$)

There it is absolutly doable to maintane a trading technique with 20% of your account in every trade. Of course it is risky, but if your win rate is high enough....
Even when it goes bad 20% of 100$ is not gonna kill anybody.

Just my 2 cents, but remember - everything over 25% can be quite dangerous because after 3 bad trades you are basically out of the game.

cheers
greg
  • #49
  • Oct 2, 2015 9:06am Oct 2, 2015 9:06am
Agreed and one of the reasons so many newbies burn out so quickly is on account of the no SL and risking over forty to fifty percent ..at that rate, the ride does not last that long..
  • #50
  • Edited 2:19pm Oct 2, 2015 1:26pm | Edited 2:19pm
I risk, theoretically(*), more than 5%. Though there is to say, that my account is actually just a small portion of my equity. I'm actually not worried by stupid decisions done by me, I'm more worried by unannounced events (and one just has to look at the geopolitical issues to know that a lot of problems are looming everywhere) so by risking more I can keep my absolute return while lowering my absolute damage in case shit hits the fan.
*) I said theoretically because I believe a fixed stop loss is a very stupid decision. The question shouldn't be "how much loss can I endure", it should be "when was my trade decision wrong". Wrong, for me, usually means I should turn my trade around which is what I usually do then.
BTW: I do not trade extremely volatile times, I have that 3 hours or so a day when the market usually behaves the way I like it.

I'm trading my account since January now, a few days after Alpari was killed off I funded a new account with another broker.

Edit #3: I'm on the 1 minute timeframe with short term trades, what I say may not make sense for longer time frames or different trading styles.
  • #51
  • Oct 3, 2015 9:43am Oct 3, 2015 9:43am
we have to consider about margin when we are risking 5 % and above , if there are drawdown like 50% above , could you still using the same lot size to trade?And most importantly can you withstand the pressure ? If youre comfortable with it , then it should not be a big problem
  • #52
  • Oct 3, 2015 12:45pm Oct 3, 2015 12:45pm
Quoting kanusuko200
we have to consider about margin when we are risking 5 % and above , if there are drawdown like 50% above , could you still using the same lot size to trade?And most importantly can you withstand the pressure ? If youre comfortable with it , then it should not be a big problem
5% risk and 50% drawdown - how often do you lose 10 trades in a row?
Otherwise I agree, margin may become an issue with high risk but 5% is usually far from that level.
  • #53
  • Oct 4, 2015 6:37am Oct 4, 2015 6:37am
5% Is way too much to risk Per trade... PERIOD! Especially for a rookie!! Sorry if you expected Fx to be easy quick money... Its not... No pro I know risks 5%
The only system that will work is one designed by and for yourself.
  • #54
  • Oct 4, 2015 12:07pm Oct 4, 2015 12:07pm
Quoting JensG
5% risk and 50% drawdown - how often do you lose 10 trades in a row?

It's not really about how often you lose 10 trades in a row, Jens.

It's about how often you have a collective group of 50-60 trades in which the preponderance of losers over winners is such that the net cumulative effect is financially equivalent in outcome to having had 10 consecutive losses.

50% drawdowns from using 5% position-sizing very, very rarely come from losing 10 consecutive trades.

Most retail traders hugely underestimate the significance of the "longest losing patch financially equivalent in outcome to ..." part, and tend to think about this issue in terms of "longest losing runs". That's an enormously misleading way to look at it. Losing patches equivalent collectively to " 'n' straight losses" are typically 5-10 times more common in frequency (depending on the overall win-rate) than 'n' consecutive losses are, and should therefore be the focus of one's attention, in this context.

Further information: Profitability & Systematic Trading - Michael Harris (Wiley 2007).
  • #55
  • Oct 4, 2015 12:29pm Oct 4, 2015 12:29pm
You can search some videos on youtube, some picky traders -probably on higher time frame- do use 4% !
It is a big difference if you have 1-2 trade in 1 month or 2-3 in 1hour...
Try to test any EA, if is profitable for a period there is an optimum how much to risk per trade.
The optimum for many of my EA did 98% drawdown !! and tuned 1k account into 30k in a few month the consecutive loss is the hardest part.

If you play with 100 usd only why not!? -even 10%..
If you play with 2-3 years of saving and intra daily... well check at demo first in 2-3 month, to see how is working for you.
I want to buy PATIENCE
  • #56
  • Oct 4, 2015 1:28pm Oct 4, 2015 1:28pm
Yes, Xela I know I (over)simplified a bit. Maybe not a good idea with all these beginners around.

What makes it work for me, is a high hit rate (ever since I started trading) and the fact that "more than 5%" is more like a worst case scenario.

@Spoon:
I agree. What some people here try to sell as rules are simply recommendations often made in a certain context just like most posts (including mine).
  • #57
  • Oct 5, 2015 7:00am Oct 5, 2015 7:00am
The way I see it, if you are planning to increase your risk per trade and have a strategy in place, why not use the mini/cent account to play with..the point being that you can work out the kinks in your strategy and move up..
  • #58
  • Oct 5, 2015 8:02am Oct 5, 2015 8:02am
"5% risk per trade?"

In one word: Dangerous!!
  • #59
  • Oct 5, 2015 9:40am Oct 5, 2015 9:40am
Quoting seahorse
"5% risk per trade?" In one word: Dangerous!!

aha ? soso ...
Depends on the strategy and the trader .. 3% is fine with my trading.. sometimes I do 5 .. and my explorer says green ..
so what ?
More importatnt is to stick to the rules.. and trade only AAA entries.

Guido
Risiko birgt immer auch die Chance.
  • #60
  • Oct 5, 2015 4:39pm Oct 5, 2015 4:39pm
Quoting Sesamstrasse
{quote} aha ? soso ... Depends on the strategy and the trader .. 3% is fine with my trading.. sometimes I do 5 .. and my explorer says green .. so what ? More importatnt is to stick to the rules.. and trade only AAA entries. Guido
Hi Guido,

For me depends on protecting in first place the money and trading with a small % of risk.
Another aspect is never to use all the account amount to trade.

Like your signature says, we never know .

Thats why for me 5% is very dangerous.

Good hunting
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