Money management help

Discussion in 'Risk Management' started by Salmon, Jan 5, 2003.

  1. Salmon


    I have 2000 $ account and i am going use stop loss 10 cents on a share, i pay 1$ a trade, so on one trade {100 shares} my loss should be 12 dollars. How much stocks is good for one trade with this small account? Can i trade 100 shares per trade or is it too much for the account?
  2. I think that the risk can be equal to 2% of the size of your capital.
    You can choose 3%,4% if you win more 70% of your trades.
    In your trade,you can buy or sell 380 shares : if you lose,380*0.1=38$ ; 38$+1$+1$=40$=loss
    It's not a great idea,but that can may be help you.
  3. Hey Salmon,

    I thought I would be the sensation here (a talking lobster), now you are trying to steal my show. Well, so be it.

    Since you are planning to use a 10 cent stop I have to assume you will want to trade more than 3 times per week. Unfortunately, the PDT rules will not allow you to do that. You need $25000 in your account in order to trade without those restrictions.

    Other than that, 100 share lots should be ok for what you want to accomplish (correct me if I'm wrong): Learn how to day trade on a rather short term basis the only way one can, which is doing live trades.

    I would stick to 100 share trades until you are really comfortable and consistently profitable (which might take years, but probably no less than 6 months) and don't worry about losing a few hundred bucks. Unless you are a resident of Laos or Pakistan you should be able to save up another $2000 in a few weeks in case you blow out your first account. It's just the price most of us have to pay in order to become profitable eventually.

    But! And it's a big butt! It is NOT necessary to risk $25000 in order to learn how to trade. Not anymore. Not in this environment with brokers like IB. That's why the PDT rule was outdated the minute it became active.

    Ideally, you would have $30000 in your account so you don't have to worry about PDT, but as soon as you get down to 25000 (which is where PDT kicks in anyway) you stop trading, maybe even withdraw what's left and save up another few thousand to start again.
  4. Salmon


    I live in Czech republic , so maximum i can send to my account is 200 dollars monthly for cover losses.
  5. rgowka1


    Position Size = (Equity * Risk%)/ATR
  6. Salmon


  7. rgowka1


    what's "hmmmm?" supposed to mean??
  8. salmon,

    i reccomend to you Dr. Van Tharp's book-- "Trade Your Way to Financial Freedom". it has much good material concerning money management. you can get it here


  9. Salmon


    hmm? What is it ATR?
  10. The True Range indicator is the greatest of the following:

    The distance from today's high to today's low.

    The distance from yesterday's close to today's high.

    The distance from yesterday's close to today's low.

    The Average True Range is a moving average (typically 14-days) of the True Ranges
    #10     Jan 5, 2003