2% stop loss rule?

Good summary. You might have given credit to Alex Elder.

I'm currently on 1.5% account capital risk per trade. I have been as high as 5% in special situations. I hope to one day be making enough money sufficiently consistently that I can (safely) escape the tyranny of the 2% rule.

 

Here is an interesting article from a well-known quant.

The 2% Position Risk Rule: Facts and Fiction

 

thanks for the article. good information

 

Yes,good stuff !

 

Conclusion
The 2% rule, or any x% rule of this sort, applies to frequent trading at low cost where the effect of a reduction in expectation due to position sizing is counterbalanced by an increase in frequency of trades.

The 2% (or X%) rule can be used with

• Medium frequency trading (scalping, intraday, short-term)
• Strategies with well-defined stop-loss levels
• Multiple open positions in different markets (portfolio heat control)

The 2% (or X%) rule cannot be used with

• Most mean-reversion strategies
• Medium to longer-term trend-following
• Strategies that do not use stop-loss

Alternative schemes for controlling risk when the rule does not apply must be used as mentioned above including but not limited to varying the strategy allocation accordingly.

 

%%
Easy to beat 2%, by keeping some capital in a local bank.
As far as one trade goes ;
IBD guideline of risk 7or 8 % max to make 24% makes much more sense.[NOT a prediction + that's for one trade/risking 2% for the stuff[one trade] i trade /invest in would be a waste time+ money.....................................................................................................]
[And leverage stuff is much different from cash markets/not just a matter of math adjustments/edit]

 

depends on yo budget

 

Actually right!

 

It’s all got to do with the risk appetite you got, some people can be more daring if they have a large capital to play around with.

 

IBD used to advocate 7-8% stop loss.
2% is too much for me for what I get into.

I prefer something along the lines of a volatility based stop as described in turtle based crap.
https://www.tradingsetupsreview.com/ultimate-guide-volatility-stop-losses/
https://www.investopedia.com/articles/trading/09/volatility-stops.asp

Go read the turtle books for more. I think VanTharp might go into this a bit.

I don't understand or use Kelly Criterion but think my post and the post that talks about it are the only posts worth paying attention to here.