How do you determine your max bet size?

Discussion in 'Risk Management' started by ScoobyStoo, Apr 30, 2009.

  1. Just interested to see what methods people use to calculate their maximum bet size. I'm guessing most people use the standard methods - fixed capital amount, fixed capital percentage, fraction of optimal F etc. However, since all these methods have well documented downsides and can be fairly arbitrary, I was just wondering if anyone out there is using anything novel and different?
  2. nysestocks

    nysestocks Guest

    Yep - guess who:D
  3. Why look who it is! :)

    Take care whereever you're off to and drop us a line if you decide to come back to ET.

    And either sort out that insomnia or start spelling "thru" properly. :D
  4. If you want to have control over risk there is no other choice but to use the risk percent method. It is not necessary to keep the risk precent constant but the method provides a means of calculating position size to control the risk provided of course you know the exit price. For example, you can adjust your risk based on a multiple of ATR.

    I find this statement true and its conclusion plausible:

    "Application of the risk percent method for calculating position size requires that before a trade is opened, the exit price level is know quite accurately. Obviously, this method cannot apply to trading strategies with varying, or unknown in advance, exit price levels. This is a drawback of the method but it may also be an indication that effective risk management can only be accomplished with simple position exit strategies"

    If you choose to go optimal, then the system has control over risk. If your system performs as expected then your risk is optimal and your equity growth maximum. Otherwise account ruin is almost certain.

    Most systems will fail at the point of maximum risk with known results. IMO just use a simple percent risk method and avoid any novel approaches.
  5. minmike


    getting started, the best way that I have found is to make as small a bet as is possible, that you will still care about it. When you get consistent, you will spend much less time worrying about such things.
  6. Interesting that you refer to your trade as a "bet"

  7. From the OED:


    • verb (betting; past and past part. bet or betted) risk money or property against another’s on the basis of the outcome of an unpredictable event such as a race or game.

    Looks like a pretty accurate description of trading to me. :)
  8. My thanks to the folks who have responded but this is all pretty standard stuff. I am familiar with and have used all these methods in various incarnations. I'm just curious to see if anyone out there has any really far-out methods which are not in the textbooks.
  9. I was only curious as to your choice of word, rather than the meaning of the word itself.

  10. Wasn't being dismissive there F9. Just stating that to my mind the definition of 'bet' fits the activity of trading perfectly.

    Anyway, there are plenty of other threads out there discussing this topic ad nauseam.

    You using any funky MM techniques for bet sizing?
    #10     May 1, 2009