2% stop loss rule?

Discussion in 'Risk Management' started by turkeyneck, Apr 25, 2018.

  1. tomorton

    tomorton


    Thanks qxr1011, now I understand why you are confused.
     
    #31     Apr 26, 2018
  2. qxr1011

    qxr1011

    i do not think i am confused
     
    #32     Apr 26, 2018
  3. qxr1011

    qxr1011

    just found the dr. elder rule , the 2% total maximum account loss on the position

    he is wrong

    and that applies to any trader short term, or long term

    the maximum account loss/win should not be arbitrary set up by trader but to be dictated by the method based on market realities

    the only thing trader can do to control the size of his losses/wins relative to the size of the account is to limit the seize of his position knowing the reality of his method and his market
     
    #33     Apr 26, 2018
  4. qxr1011

    qxr1011

    furthermore from elder's 2% rule follows that the stop should be not more than 2% of teh account , how else u control you maximum loss from the position at the entry based on that rule?!

    and this wrong !!!

    but many countless traders do exactly that !!!

    not realizing that nothing will save them : not 2% rule, not 1%, not even 0.1% rule if the underlining rules of their method are not based on discovered market fundamentals

    if those fundamentals are discovered correctly then the total loss or total win also should be based on them and whatever percentage it is from the account (based on the size of the position) - so be it
     
    #34     Apr 26, 2018
  5. tomorton

    tomorton


    What market fundamentals do you mean? For example........?
     
    #35     Apr 26, 2018
  6. True, considering you make position size adjustments. I was assuming OP was targeting uniform sizing.
     
    #36     Apr 26, 2018
  7. qxr1011

    qxr1011

    for example determination on which chart (bar interval) the specific S/R should be drawn at and what will constitute its break out

    another fundamental is the definition of the trend and what will constitute its breakout

    those are universal (apply to any bar interval be it 1min or 1 week) fundamentals of the market structure
     
    #37     Apr 26, 2018
    ujjwalsaha likes this.
  8. tomorton

    tomorton


    These are absolutely fine. Using these principles would allow a market-sensitive and rational placement for the stop-loss.

    None of which would exclude the applicability of a maximum risk of 2% of account capital. Elder talks repeatedly about using TA to locate the stop-loss. He says the 2% is a maximum risk, not a required risk. He talks very specifically about position sizing once the stop-loss has been located on the relevant chart.

    As far as I can tell, he never uses the maximum acceptable loss in $ or % to locate the stop-loss on the chart.
     
    #38     Apr 26, 2018
  9. qxr1011

    qxr1011

    all the talk about maximum percentage is useless for the trader and in fact misleading because most read it exactly how OP read it and logically so

    but most importantly: without working method what this rule does is just determines the speed at which account goes down the drain .. then why 2%, not 1%?

    any working method of any functional trader that works for a living can be retrospectively examined and the average rate of risk per trade (percentage wise off the account size) can be determined, that what i expected he was talking about

    and if compared they probably are with certain limits (i do not know which) , but lets assume it is not more than X %

    but even then this X% has as much meaning as the average temperature in the hospital - it does not say to a wannabe trader if he is alive with his method or a working dead

    ====As far as I can tell, he never uses the maximum acceptable loss in $ or % to locate the stop-loss on the chart====

    but that exactly what follows form his rule, and that is why OP is asking
     
    #39     Apr 26, 2018
    beginner66 likes this.
  10. qxr1011

    qxr1011


    instead of making the fucking rule Elder should of just said that on average (if he has those stats) functional trader with working method usually risk certain percentage of his total account in the order of...

    but that is determined post-factum and should not be a guidance to anyone especially determinism stop loss, or position loss, etc

    especially in determining functionality of the trader or his method
     
    #40     Apr 26, 2018
    beginner66 likes this.