you risk the same on all trades?

Discussion in 'Risk Management' started by daniel_tysen, Dec 10, 2010.

  1. Hi there,

    I wonder how you handle this. Let's say you're trading futures scalping for a few points in the ES during the day with a stop of 3 points. But on another day you might want to get in swing-trades with a stop of 10 points. Since you like it all you also sometimes take position trades with stops of 40 points.

    Of course the daytrades usually last not longer than an hour or two if they get stopped out. The swing-trades usually take half a day to a day till they're closed and the position trades might run for a week or longer.

    Now how do you handle your risk? Do you risk the same amount of your account on each of those trades? Or do you risk less on a day-trade than on a swing-trade and most on a position-trade? If so why?

    For me it feels weird to be in a position trade for 2 weeks, get a gain of 2% and then lose the same amount within an hour on a daytrade. But at the end a trade is a trade and I wouldn't say the position trade has a much higher probability to work than the daytrade.

    Another way I thought about is simply taking the daily ATR and determine the risk (contracts to trade) with that one and simply always trade the same number of contracts...

    So how do you do it?
  2. anyone? ;)
  3. If you have a good system, there is no risk. As every good salesman knows,"Thank you for the rejection! You put me one 'no' closer to "yes'!"
  4. I use the same 3% risk on all trades as my max..sometimes I'll start with 1% then add more, but it almost never exceeds 3.
  5. Shagi


    Open seperate accounts - one for day trading and another for position trading. It helps mentally.
  6. Cmon guys...I want a lively discussion here! Go away from the "I lost bla bla my account" threads and do something useful! :)
  7. Constant % risk is the best choice with most strategies.

    Just test it, reality will confirm
  8. % risk should be determined by the trade expectation. If you have a truly great setup, then yeah, why not risk the same if it's a short-term play?

    In fact, there is an argument for risking *more*, because a short-term play that occurs frequently gives you multiple opportunities to grind out the statistical edge, whereas a position trade setup that might happen 2 or 3 times a year is much more likely to have a negative result for the year.

    Overall I would just size the trade based on the odds and win rate, not the timeframe.
  9. I'm a discretionary trader so I don't have a system to measure etc. Also I don't believe I'd be good in that stuff.

    So let's say my trades all have a 60% chance of winning. Doesn't matter if they last a day or a week.

    But my problem is that psychologically it doesn't seem to make much sense to me to get in a trade wait for a week to see maybe a nice profit of 1.5R and then do a swingtrade that lasts 8 hours and stopps me out with -1R.

    Also just thinking about it logically, if you use a tighter stop odds are higher you get stopped out on some intraday-news event or whatever as when you're using a wider stop. Of course the risk:reward tend to be better with smaller stops but it gets equalised by the trades you get stopped out.

    So wouldn't it make more sense to risk less on a trade with a small stop and lifetime? Just thinking about it logically...
    #10     Dec 16, 2010