You should never ever risk more than 2% of TLNW

Discussion in 'Strategy Development' started by Buy1Sell2, Aug 6, 2009.

Do you use prudent risk management?

  1. I risk no more than 2% of TLNW on any one trade/idea

    15 vote(s)
  2. I risk more than 2% of TLNW on any one trade/idea

    18 vote(s)
  3. I risk no more than 2% of my account balance on any one trade-idea

    14 vote(s)
  4. I risk more than 2% of my account balance on any one trade/idea

    30 vote(s)
  5. I really don't know

    4 vote(s)
  1. Traders should never ever risk more than 2 percent of TLNW (Total Liquid Net Worth) on any one trade/idea. --Ishmael:)
  2. When answering the poll, please answer according to which benchmark you use--either TLNW or account balance.--Izzy:)
  3. is that from the gorilla ishmael?

    i divide up my portfolio as such assuming all winning days in a row with a goal of having a rather binary outcome each day of either +1 or -1 with my strategy:

    day - balance a - balance b - dayp/l
    1 100 0 +1
    2 100 1 +1
    3 100 2 +1
    4 100 3 +1
    5 100 4 +1


    at day 10 once i have 10% saved up in my "b" balance- i bump it up to a 2% risk of my original balance and view it as if i have 5 get out of jail free cards. if i ever want to increase in size i make sure i can puke 5 days in a row and just end up at my previous size if i cut back at that point. that's how i manage my bankroll at least
  4. It's interesting that with the sample so far, we can see that risk management is low on trader's lists. Not surprising I guess--
  5. Well you seemed to have posed the question incorrectly based on your own methodology. You have stated that you keep the vast majority of your TLNW outside of your trading account. So if the cash in your account only represents say 20% of your TLNW then a 2% risk of that TLNW represents 10% risk of your trading account. Therefore you fall in the same camp as the majority of poll responders.
  6. No. I posed it so as to see how many people don't pay attention to TLNW. If you do pay attention to TLNW,which is what should be done, you would not answer the poll with regard to your account balance.
  7. The real question is "what does TLNW have to do with trading, intra-day or position sizing"?

    In most people's minds, their brokerage trading account balance is a seperate entity unto itself ... and that is the way it should be.
  8. I understand what you are saying and what your intention was, but the fact remains that anyone who trades like you has to answer positively to two of your poll choices which is not possible in these polls, therefore you have a logical inconsistency in the results. That said, we know the majority of traders are well undercapitalized, so they feel that they have no choice but to take larger than recommended risk.
  9. One must look at the entirety of oneself in order to be successful. Not considering this is an oversight that most traders make. Of course, it could be possible that people who are focused on risking a percentage of their account are actually dealing with TLNW as the account represents the entirety. Or, and I hope this is not the case, there may be traders with little, none, or negative TLNW, and trade anyway.
  10. This thread is nonsense. LIBOR is at 50bp and the average 401k is approx. 45% invested in equity product. They're risking more than 2% of TLNW, which is a ridiculous metric.
    #10     Aug 7, 2009