Risk Management: Stock

Discussion in 'Risk Management' started by .sigma, Dec 12, 2019.

  1. notagain

    notagain

  2. ironchef

    ironchef

    The question before this question is how to establish an expectancy, if your method has negative expectancy, it is a moot point.

    Expectancy = (probability of win) x (win) + (probability of loss) x (loss)

    If it is negative, you will be wiped out. Trade small and trade often (tastytrade preaches this) only means you will be wiped out slowly but surely.

    Once you know your expectancy, it is easy to calculate your Kelly and fractional Kelly, then trade accordingly.

    I am relatively new to trading but was able to establish my expectancy after a couple of years. Surprisingly the average hasn't change that much over the years.

    My win rate? ~ 40%.
     
    #12     Dec 16, 2019
    drcruz and taowave like this.
  3. It depends on how much you want to risk and your strategy. If you have good setup forming risk 5% and less accordingly to the setup
     
    #13     Dec 21, 2019
  4. Andrew_87

    Andrew_87

    Exactly, there is no exact universal way with which we can manage our risk. Rather it varies with the type of strategy and trading plan.
     
    #14     Dec 27, 2019
    cornerstone likes this.
  5. nursebee

    nursebee

    Account size and price of the issue have little to do with risk management.
     
    #15     Jan 4, 2020