The math behind this "advice" is as follows: If you make one trade with 100% of your capital, you pay $20 commission. If you make 50 trades each utilizing 2% of your capital, you pay 50 * 20 = $1000 commission.
if it does'nt do what i think,i immediately bail. if it regains its footing i just jump back in. i never risk more than 1%,i just bail and get back in. why risk 10% then you spend the whole day worried about breaking even rather than achieving a profit. even 1% is alot in my opinion. i like to wait for a confirmed break of a key level then jump in.
First, what does account size have to do with anything? All an account does is provide the margin necessary for the markets you plan on trading simultaneously. It has nothing to do with risk capital available, other than being funded by it. And if you were to use a silly 1-2% rule it should be based on the amount of risk capital available instead of account size. Second, your bravado smacks of an amateur who has yet to learn the proper respect for the markets. Successful traders know they get paid to wait and are never in a hurry to do anything until the market(s) give them permission. And no, you are not right. In fact you couldn't be more wrong.
$50,000 Risk 10% - lose another 10% - lose another 10% - lose You now have $35,000 left To get back to break even you have to gain 43% And what if you have multiple positions open..........in the words of M*A*S*H* - suicide is easy........
Thats what works for me basically. Willingly losing 10% is just horrible money management IMHO. As far as people not knowing what their doing using a 1 to 2 percent rule for a stop. I find that assumption laughable. I guess it makes me a f'ing idiot that continues to make money using less than a half percent stop on all my trades. Actually most of my trades 99% never risks more than.25% of my total account. .25 % is normally my extreme. I agree with enforcer if I get in a trade and it does'nt either hold its ground or starts going my way then I will bail and re-enter if it turns back in the favorable direction. I have been stoped out of stock 3 to 4 times in a day snd still jumped back in to get all my losses back and then some. Of course we all have different styles and risks, but basically calling people stupid for using a 1 to 2 percent stop has no bases. It is nothing more than just your opinion, probably because it does'nt work for your style of trading.
I personally recommend sizing up slowly. See if you make more money trading 1200 shares and can still follow your discipline, then size up to 1400, 1600, and maybe you skip 1800 and go straight to 2000... but practice trading with 1200,1400 and 1600 first. You'll be able to double your money, or make 190% the amount you made weith 1000 shares, most likely. especially if you're position trading in liquid stocks.
I will usually risk about 1-2% on a trade. Thats 1-2% of my account, not 1-2% of the trade. Normally I will put about 10-15% of the account onto a trade. If I am trading well I will slowly build that up to 20% of the account. I usually have a stop at around 6-10% of the trade. Even if I get hit with a 10% loss on a 20% trade, its still only 2% of my total account. I will tighten the stops if I have multiple trades going and one gets hit. It seems to work well for me.
Do you mean that you take a position thats worth 10% of your account or do you mean that you will lose 10% of your account if the market takes you back to your stop?
I am easily taking position 100-300% of my account. Risk is depending on number of shares. If I am placing stop $0.15 the loss will be same by 1000 shares /if stock is liquid the filling price will not differ much/ by $1 or $100 stock. Ok, the stop is much more often hit by $100 stock but if trade is not going in my direction why to "sit in hole" and see hopeless how the loss is growing? /Ok, if internet connection break between purchase and stop setting this is another question but therefore my stop is on place in 2 seconds/