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?
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
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.
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.