Hi all, I’ve been trading for 3-4 years now, with focus on building complementary systems so that I can have a compounding machine of my own where I feel comfortable allocating majority of my savings from day job. I think that’s going well for now and particularly suits my conservative attitude . however I also feel like I’m at a point where I understand risk management well enough and should allocate some percentage to more discretionary high leverage high return type of plays in small caps, fx, futures, etc. - really targeting those big returns to try to boost net worth How much as percentage of NW should I allocate to that type of trading with goal of boosting net worth? Q2: How can I get over a more conservative mindset to really go for it? … or maybe I should just stick with my focus on building my slow and steady “compounding machine”? would love to hear from the pros trading multiple styles & accounts on how they think about “going for it” EDIT: more context, I think my approaches to building complementary systems that work across Bull, bear, flat markets is sufficient for long term -> I’m trying to ask how much allocation should I “play with” knowing it could go to 0 with higher risk approach, and what strategies might one use to try again? E.g. only use 5% of booked profit, once per year thanks
You contradict yourself multiple times. You are highly risk averse with a conservative attitude but then want to jump into "high leverage high return" vehicles. If playing fast and lose does not correlate with your entire approach to life then you wont ever feel comfortable trying to adopt to it. So don't go for it. Go for what works for YOU. I guess what you are suffering from sir is that you smelled the cheese and got greedy. And that's usually right before a large drawdown. Why don't you just continue what apparently has been working...or you potentially pour more money into the working approach instead of getting all excited about instruments that may rip the skull out of its socket. I promise you that in due time all the usual suspects will enter this thread and will share their wisdom with their micro and mini accounts and tell you that you should be doing this or doing that because it works for them. Well guess what, you don't know what really works for them, for what it's worth they might be lying even to themselves. What you do know for certain, however, is your own performance and what currently works.
You have traded ONLY when the market "had the wind at its back"... when the Fed was pumping money into the system and artificially suppressing interest rates. You only think "you got it"... but you won't know until you've traded through a genuine bear market and are still standing. Bull markets are easy for most. Bear markets are very difficult for most. The "market" is both. Go slow. You're not really ready yet to "go for the brass ring".
Buy calls/puts or call/put spreads in a few markets. It's not complicated even if you're not an options trader. Limited risk with big profit potential. Example: SLV (silver) calls or call spreads
There is net-worth and liquid net-worth. I wouldn't risk more than 10% of liquid net worth in a high risk spec account, I tend to use about 5%. Which is less than 1% of my total net worth. Also to consider is your monthly income. If you make $20K a month you can put more in a speculative account vs someone who makes $5K a month. Only you know how big a drawdown in absolute $ you can you really stomach. Only you know what your profit objectives are. You can aim for high returns using a Kelly bet fraction. Or even larger than Kelly if are ok with having a chance of your account going to zero. If your system has a good year (above average on the normal curve), you can make a shit lot of money using leverage. If your system has a below average year, you end up with not much or any thing in the way of profits. You just end up churning your account. If your system has a large drawdown you will have to recharge the account.