How much to risk per trade?

Discussion in 'Risk Management' started by castor_t, Jun 12, 2013.

  1. castor_t


    Thanks all for the advice. Really helpful.

    As I mentioned earlier, I am new to trading and doesn't know how to look at technical charts etc. I am a Scalper at the moment and I am making trades for 5 cents.

    I find trading to be very thrilling and entertaining. If I could make this my job to earn a living, it would be the best.

    I am maintaining an excel sheet to track my progress and my daily trades. I was able to earn 17% in the first week and 20% in the second week on a $1000 account. I know that this is a great progress, but it's on just a $1000 account. It's sort of an experiment and if I could succeed, I will raise my account. But I know achieving the same percentage on a $20,000 account is very difficult. Is it not?
    #11     Jun 13, 2013
  2. just keep greed in check.
    #12     Jun 13, 2013
  3. castor_t



    How do you guys check your progress? Excel sheet or do you use some software?

    Everywhere I read, I see that almost all of them complain that traders lose money? Is that a fact, or are there really some one who made good money consistently on long term here?
    #13     Jun 13, 2013
  4. Handle123


    From day one back in 1978 I made money trading stocks, but it wasn't like it is today, you found good companies and stayed long time cause the costs for 100 shares was $150. But when I got into Commodities, that was totally different when I started that in 1986, I lost and lost badly everything and then some I was making in stocks each year trading long term. Took me seven years to finally get past me being lazy and learning how to program. Then in one year, I made everything I lost in those seven years and then some, that was 1992 and haven't looked back for long term commodities. Then I thought, "hey, I have all this extra time on my hands, let's day trade", what a dumb ass I was thinking that. Took a couple years of 16 hour days to learn how to day trade IBM and traded that for five years. Oh no, pleassse don't venture into S&Ps, yep, when on to lose for awhille in that till I learned how to day trade the Spoos, then ES.

    One would think price bars are price bars, but each instrument has its little quirks, especially the ES and Crude Oil. But you study enough charts and eventually you get it. But many won't ever get to area of being good, they run out of money, family issues, wife nagging when you going to make real money. When you coming out of your man-cave. Then there is your ability of backtesting, this takes an incredible amount of time to figure out how to stick in all your money management rules into logical way of your program.

    You have to figure out who you are as well, what will your personality allow you to accept. In my youth, large drawdowns were acceptable providing I made a ton of money. Now I can't handle ragged equity curve, I rather give up huge profits for tight losing percentages. A few years ago, I saw my ability to continue to do what I was doing rapidly slowing down, so eventually hired a nineteen unemployed defense engineers and taught them how to day trade, seven were let go cause not everyone has talent for this. Friday was first day since early January I day traded and only an hour in Gold, made couple hundred but felt like a newbie, it is so easy to lose it when you don't day trade each day.

    I have ventured into trading spreads now since I am not fast enough to day trade. I had always wanted to spend more time do this. So far been nicely profitable, a slow way to make money and for those who have smaller account, spread margins are very much smaller than outright positions.

    I think trading is like anything else, you bound to make money doing it if you stay with it long enough. It certainly not the system you use but your ability to do every rule you have backtested and do everyday the same way. Thank goodness for automation, some methods are downright total boredom, fall asleep waiting for a signal, or it is a HFT and would miss many of the signals.
    #14     Jun 15, 2013
  5. The amount you risk is directly proportional to your advantage to win, and inversely proportional to the square of your tolerance for risk.

    In my case I always bet it all, because my edge is close to 100% and my tolerance for risk is infinite.

    I've lost it all a few times. It's not that bad.
    #15     Jun 15, 2013
  6. Margin is the number one enemy, overtrading is number 2, real money is made by position trading. look at under looked RAD , it was a dollar last year. You could of made bundle.
    #16     Jun 15, 2013
    comagnum likes this.
  7. ==============

    How much to risk?? Less risk is best /better if you want to last.
    And how many times one has blown up an account by risking to much?? An account blown up once or twice is too much risk;
    but good education is exspensive.Wisdom is profitable to direct:cool:
    #17     Jun 17, 2013
  8. Metals4me


    The amount you risk per trade is completely dependent on the expectation of the strategy you are trading. You need to determine your likely percentage of winners, the likely longest losing streak (and then double this to be safe), and the ratio of how much you make on a winning trade vs. the loss on a losing trade. Then you need to determine your own risk of ruin. If you are starting out with $20K, is your ruin figure $20K, $10K or only $5K? Once you have these parameters, then you determine the appropriate bet size required to AVOID ruin.
    #18     Jun 23, 2013
  9. As a beginner you should risk as little as possible per trade i.e. a 1 lot, or odd-lot share size. The reason is that your edge is probably negative, so you will lose the least amount by trading the minimal size possible.

    If your edge is positive, it will become obvious after a while and you can then go onto normal position sizing methods.
    #19     Jun 23, 2013
  10. Pipflow


    To be frank i sometimes take more risk per trade when am very much sure regarding the market trend.
    #20     Jun 24, 2013