imjohn, thanks for your response it was helpful. is this how you derive your income? what % risk/stop of your one trade is to your account?
You are assuming that ALL professional traders are SO successful that they can lose 10% of their account one month and be able to afford to take an entire month off the following month. I would have to disagree with that statement, but are there PRO's out there that can chime in on this subject ???
well considering my source is all 3 Market Wizards books I'd say you have zero idea what you're talking about. It's clear you don't even have a good grasp of leverage. The common trait between all of them is extremely strict risk management. If you're not trading professionally with a roll over 100k and 2 years of expenses stashed away you're making a huge mistake and should probably get a day job until you have the requisite capital. Professionally trading requires large capital reserves and backed up expenses for drawdowns that take you out of the market. Again, it's really funny that you think pros don't have risk management. 10% is really loose, a few very famous traders use 1%. I really enjoyed you trying to discredit me with your statement calling for pros. I could cite quite a few books that discuss proper risk management in professionally trading - but I wonder if you even read. Do you even understand how much you have to win back to get back to breakeven after losing even 10%? Check the math. Sitting out for a month is smart. It's going to take work to get back to breakeven.
Yes I trade ES, and tend to think in Ticks (not %). My "average" stop over the last 1000+ trades has been 12 ticks per trade. In my trading account, I maintain $12500 margin per contract (personal preference). So with ES @ 12.50 per tick, my base is a 1000 tick account. Risking 12 ticks of my 1000 tick account, I have been risking 1.2% of my account per trade. This has worked for ME, and it's based on my specific entry/stop method, risk tolerance, comfort level, etc. but I'm not saying its the way to go, or that it will work for someone else. That said, one could be more conservative than me, and decide to maintain $25000 margin per contract (2000 tick account) and a 12-tick stop would be .6% risk per trade. Or, could be more daring and only maintain $6250 margin per contract (500 tick account), and a 12-tick stop would be 2.4% risk per trade.
You are not looking at the Trader as a trading BUSINESS. As a trading business, "revenue" comes from trading profits. @gaussian mentioned a good portion of the account is used as "cushion." Most businesses call this "working capital". From working capital, in my case W2 wages which includes payroll taxes, are paid to me. Once paid, it is mine to do with as I please, at the individual level... just like any working stiff living life on a hamster wheel. In this way, trading profits always go to replenish working capital first, and additional accumulations, again in my case, can be used to expand the trading account or can be distributed to shareholders of the entity, outside of and in addition to W2 wages. So if a trading account is say 25K... with as example monthly W2 wages and other business expense of say 10K, only 15K would be used for for generating revenue. If working capital somehow got depleted, just like any other business the business either gets re-funded or closes. Not to be overlooked however, is that while the total account value is generally considered fixed, financial engineering can be, and is, employed. if I lost 100% of the trading portion in one month, I still got paid! If I was a good hamster, I stashed plenty of nuts so I could take a vacay if I wanted. Or start again. Or open a donut shop. Or, and, or, and, or...... I trade futures intraday. I am flat end-of-day, everyday.
gaussian, I appreciate your response. I did not try to discredit you, I am seeking others opinions and ideas, especially those who are trading for a living, as they may have a differnt view point than you about taking a month off. Thanks
Well risk percentage will depend only on your risk tolerance. For me the daily risk rule is not to exceed my risk percent for the day in any case.
After reading the last comment about slippages and losses in trading, my eyes involuntarily climbed onto my forehead. This is the basics of Forex, people. Slips on the news, gaps need to be considered, this is normal. The fact that you merge on gaps is a jamb exclusively yours. Who makes you climb into the market when the heat is on, what are you waiting for? Learn the mat part. With Fiatotrade, for a long time, at the beginning I rolled a tantrum of support a couple of times, but when I delve into it, I sat and read it, everything went well.