High % Risk and Compunding

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Old Feb 14, 2011, 7:07pm   #1
 
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High % Risk and Compunding

Anyone tried using or uses high % risk?

I will be taking 20% of account to use for high risk with the aim of compunding (I may as well put my signature to use).

My account has 100:1 leverage and if I have worked it out correctly then to get a margin call at the point my SL is hit is given by:

SL/(100 + SL) SL = stop loss in pips.

So with a 25pip SL the most I can risk is 20%, with SL = 100pips it would be 50%, but using SL = 25pips, 100pip gain is 80% account and 50% acount growth with 100 pip SL.

Kelly's number gives the % to risk for optimal growth if you know the probabilities of win, loss, or breakeven:

Fraction to bet F = (R*W-L)/R(W+L)

average growth per trade y = [(1+FR)^W]*[(1-f)^L]

Account growth after N trades = y^N

R = Reward (as in 1:3 etc)
W = probability of win
L = probability of loss

Alternatively if you are going to risk a certain fraction, its easy to calculate the minimum W needed.

So if your W = 55%, L=45% then for R = 1, F = 10% and average trade makes 1.005 gain.
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Old Feb 14, 2011, 7:15pm   #2
 
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Re: High % Risk and Compunding

Why are people so reluctant to actually learn how to trade?

...all these magic formulas...
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Thanks! The following members like this post: meanreversion , amit1986 , Pazienza
Old Feb 14, 2011, 7:43pm   #3
Joined Feb 2011
Re: High % Risk and Compunding

Quote:
Originally Posted by Scotty2Cues View Post
Anyone tried using or uses high % risk?

I will be taking 20% of account to use for high risk with the aim of compunding (I may as well put my signature to use).

My account has 100:1 leverage and if I have worked it out correctly then to get a margin call at the point my SL is hit is given by:

SL/(100 + SL) SL = stop loss in pips.

So with a 25pip SL the most I can risk is 20%, with SL = 100pips it would be 50%, but using SL = 25pips, 100pip gain is 80% account and 50% acount growth with 100 pip SL.

Kelly's number gives the % to risk for optimal growth if you know the probabilities of win, loss, or breakeven:

Fraction to bet F = (R*W-L)/R(W+L)

average growth per trade y = [(1+FR)^W]*[(1-f)^L]

Account growth after N trades = y^N

R = Reward (as in 1:3 etc)
W = probability of win
L = probability of loss

Alternatively if you are going to risk a certain fraction, its easy to calculate the minimum W needed.

So if your W = 55%, L=45% then for R = 1, F = 10% and average trade makes 1.005 gain.

Good luck...I think at these levels of risk...ruin is immanent.....

This is coming from me who posted this thread......

http://www.trade2win.com/boards/firs...managment.html

Check it out.......ps what techniques & styles do you intend to use?
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Old Feb 14, 2011, 8:23pm   #4
 
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Re: High % Risk and Compunding

Scotty2Cues started this thread
Quote:
Originally Posted by SpiritBeing View Post
Good luck...I think at these levels of risk...ruin is immanent.....

This is coming from me who posted this thread......

http://www.trade2win.com/boards/firs...managment.html

Check it out.......ps what techniques & styles do you intend to use?
Thanks. Only looking for a few high probability setups a month using S&R on 4hr (sometimes 1hr) TFs and basic fundamentals/market sentiment, no technical indicators
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Old Feb 14, 2011, 8:23pm   #5
 
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Re: High % Risk and Compunding

lol, 25 pips=20% of account. Good luck with that
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Old Feb 14, 2011, 8:26pm   #6
 
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Re: High % Risk and Compunding

Scotty2Cues started this thread
Quote:
Originally Posted by Masquerade View Post
lol, 25 pips=20% of account. Good luck with that
its 4% of my total account though
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Old Feb 14, 2011, 8:46pm   #7
 
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Re: High % Risk and Compunding

But 20% of the part of the account you've apportioned for it. So what's your point?
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