What is the maximum drawdown you would be prepared to take?

Discussion in 'Trading' started by Cutten, Nov 14, 2003.

  1. Imagine you have a $200k account. What is the maximum drawdown you would be prepared to risk in order to maximise your returns?

    If you had $1 million, would your answer be different and if so, how and why?
     
  2. Chipdude

    Chipdude

    I trade stocks and typically have 5 positions on at the most. I am
    willing to risk 2 % of equity in each position so if there are no gaps etc over my stop I am willing to take a 10 % drawdown with
    5 positions. This would not change whether I had 100 K or
    1 mill.

    chip
     
  3. That depends to a great degree on the potential reward. I might not risk 10% to gain 10%, but would do it to gain 50%.

    Also depends on the risk. If it's a true abritrage trade where there's no risk if executed right, then I'd bet a lot more than on a directional trade.
     
  4. That is not the definition of DD. What if you had several days where cumulatively, it added up to a 15-20% loss? That would then be a DD and the question of this thread would apply.