It depends how many 2% risk positions you have opened simultaneously. 3 times 2% = 6% is ok 10 times 2% = 20% is probably not ok; it depends on your system 30 times 2% = 60% is definitely financial suicide.
I use 1% per position with 6% total risk per account. It fits my risk comfort level and trading patterns. If you want to optimize the risk vs. profit, you can use a modified Kelly formula, i.e. 1/5 or 1/6 Kelly, to determine your maximum risk per account. Then divide it by the number of positions you have opened simultaneously.
I'm not concerned with risk of ruin. I hate deep drawdowns. My testing has shown me the single biggest factor in the depth of a drawdown is the amount risked per-trade. At 1.5% at some time a account will experience a 30%+ drawdown. For my trading, 10% is as much of a drawdown as I'm willing to accept.
Doesnt bother you the fact that you could make more if you had risked a little bit more. As ralph vince says "if you are not trading for optimal profits, then you belong on a psychiatristâs couch rather than in the marketsâ. Of course his optimal F is suicide but he still makes a good point
Trading is not about maximizing profit but rather maximizing the reward (profit) to risk (max. drawdown) ratio. In optimal F the maximum reward:risk ratio is achieved at the optimal F. By using reverse notional sizing anyone can achieve the same reward:risk ratio independent of the max. drawdown. There is nothing to be gained by increasing size per-trade unless you just prefer to have larger drawdowns.
Realistically, "optimal" is best viewed after the fact. Because the future is far more uncertain than a historic probability distribution, you need a wide margin for error if you wish to survive the long term. Ralph Vince seems to live in an imaginary, optimal world. If you don't agree with his Optimal F, then why would you agree with his platitudes? Anyone can be a hero in his own book, but how is his actual trading going? That's not a rhetorical question, I'd really like to know. Personally, I'm not very exciting. < 1% on intraday ES trades. One day, I just may go crazy and do a full 1%. P.S. I share acracy's sentiment regarding drawdowns. I have had major drawdowns in my earlier trading, and I had difficulty coping. For me, there is value in a smooth equity curve.
Agree with you. Based on reading in other BBs, it seems some traders ignore "black swans" type risk. Not just the occasional market event, but events in placing trades such as loss of internet connections, somebody hitting a telephone pole, failure of their computer with a big position and no backup, exchange problems and the like. DS