A lot of misquoting me, but it seems you agree that "It is not, and never purported to be, a precise calculation of optimal position size under all circumstances, timeframes, leverage conditions etc." BTW Buffett had a 50% DD in 09, he was long stock only and no leverage, so he is perfectly Ok.
Haven't put too much thought about the proper percentages. I'm still a novice who's always scared of losses. I just simply go in with a size that I can get out with ease, without raising my blood pressure, when the market turns. My position size, thus, depends more on the stock's liquidity rather than the account value. Trying to improve one day at a time. Any critiques are welcome.
No he didn't. In 2009 markets went up a huge amount and Berkshire made a lot of money. From 2007 to 2008 the book value of the company he runs fell from 121bn to 109bn, a decline of about 10%. Besides, Buffett is not running an investment fund, he is running an insurance company and business conglomerate, so he does not have the same kind of risk of a spiral of redemptions like a fund manager would have. He is stinking rich relative to his annual expenses, so he does not have the same risk as a typical trader who has to live off their capital each year. So, Buffett is a poor comparison, even if he would have had a 50% drawdown in 2009 (or 2007-2008), which he did not. And yes, I agree that a rule of thumb for position sizing is a rule of thumb for position sizing. Doh.
Is DD based on book value?? Usually when SPY would drop 50% the BV would not drop nearly as much. And yes berkshire had a 50% drop in "price" in March 09. There is a lot of people that don't have have an invetment fund & don't live off their capital each year, for them a 50% DD in SPY "price" (not book value) should be accepteble based on your critiria. I would add that's "only" if you don't use leverage
I personally max out at 3% risk per trade with a 70%- 80% win ratio. Reward 1 Risk 1.5 Any more is risky due to the win ratio always changing with future performance. I really prefer 2% and if my account increases to a respectable amount i'd have no problem decreasing to 1% or less. Combined with a few trades a day and compounding daily. 1% per trade is more then plenty . I feel greedy going for 3%.