How big should be a reserve fund?

Discussion in 'Professional Trading' started by elitetradesman, Apr 7, 2011.

  1. By a reserve fund, I mean the money you put aside to replenish your trading account if it goes below the minimum. For instance, many day traders start each day with the same amount of money in their account, regardless of how they did the day before. When they lose, they need to move money from this reserve fund to their account.

    How big does this reserve fund need to be compared to the size of capital to stay solvent? Anyone know if there has been a research done on this? Is there any rule of thumb like 2% rule or 1:3 risk/reward?

  2. Roark


    You should not be replenishing your trading account from a reserve fund. If you lose, you should reduce your position size for future trades until you recover the losses.