MM and increasing size

Billy Gates · Apr 19, 2011

Hello all,

I have been paper trading for a few months now and have a basic method that I follow. I am in the process of writing out my trading plan but have come to a bit of a stand still on the MM and Risk part of it.

I know how crucial this can be and kinda feel that I may have been wasting my time testing my method without having this in place. At the time I was just just interested in improving my analysis skills.

I have a few questions that I would appreciate some help on if anybody would be kind enough . They may seem obvious but are just out of reach at the moment.

How much money do I need in my account to start trading at £1 per point and how can I increase my size according to the growth in my account ? I know this will also depend on my Risk Reward ratio but I was wandering if there was a mathematical formula that can work this out.

I would love to reach £5 per point in a few months and ideally get to £10 per point some time this year.

I know this may seem far fetched an very optimistic. I am quite disciplined and determined.

Thank you all in advance.

anley · Apr 19, 2011

How many points are you risking on average per trade?

Billy Gates · Apr 19, 2011

That depends on the volatilty and time of day but maximum at anytime is 38 pips. The reward on this size is expected in excess of 80 pips.

Thank you.

anley · Apr 19, 2011

Call it 50 ticks.

1% risk per trade gives you a minimum account size of £5,000

2% risk per trade is of course £10,000.

Start risking more than 2% and chances are the strategy and you will break down very quickly. We all say we can handle the risk but when it actually happens it's a different story.

Remember, if you want to stand a chance in this game start thinking RISK and not reward as this is a RISK based game and not a reward one. The rewards come but only if you respect the risk. But if the other way around, think reward first then risk (if at all), then probabilities suggest it will all end in tears.......

Good luck anyway.

donaldduke · Apr 19, 2011

anley said:
Call it 50 ticks.

1% risk per trade gives you a minimum account size of £5,000

2% risk per trade is of course £10,000.

Start risking more than 2% and chances are the strategy and you will break down very quickly. We all say we can handle the risk but when it actually happens it's a different story.

Remember, if you want to stand a chance in this game start thinking RISK and not reward as this is a RISK based game and not a reward one. The rewards come but only if you respect the risk. But if the other way around, think reward first then risk (if at all), then probabilities suggest it will all end in tears.......

Good luck anyway.

I dont think he needs that much.. not with bucket shop margin rates.

He needs margin for £1 pp to his stop, less than £100 quid with someone like IG Index.

Then on top of that the OP needs enough to cover his largest expected drawdown.. lets say a 10xRisk (10R) drawdown.. or about £400 for drawdowns.

So £500 in total is the minimum required.

This amounts to 8% risk per trade, that will need to come down as the account grows.

I would recommend starting with £1000 to keep the risk per trade to below 5%.

Black Swan · Apr 19, 2011

Billy Gates said:
Hello all,

I have been paper trading for a few months now and have a basic method that I follow. I am in the process of writing out my trading plan but have come to a bit of a stand still on the MM and Risk part of it.

I know how crucial this can be and kinda feel that I may have been wasting my time testing my method without having this in place. At the time I was just just interested in improving my analysis skills.

I have a few questions that I would appreciate some help on if anybody would be kind enough . They may seem obvious but are just out of reach at the moment.

How much money do I need in my account to start trading at £1 per point and how can I increase my size according to the growth in my account ? I know this will also depend on my Risk Reward ratio but I was wandering if there was a mathematical formula that can work this out.

I would love to reach £5 per point in a few months and ideally get to £10 per point some time this year.

I know this may seem far fetched an very optimistic. I am quite disciplined and determined.

Thank you all in advance.

Four grand risking 1% is 40 quid..Risking 2% per trade you need a couple of grand and you're off.

If you've got 4 grand do it in stages, use 2 grand first at 2%, you'll be safe in the knowledge that you can always dust yourself down and come back if you have a big drawdown and/or once you're more confident you can add to your account..

Preserve your capital however small (and I'm speaking from the position of blowing up a few small learning accounts a few years back)

anley · Apr 19, 2011

It would be fine to have £1000 and risk 5%+.

But can the OP trade with such potentially large equity swings? Most say they can (with no money at risk) but when faced with a 40% drawdown in real-time trading and then the realisation of a gain of around 70% is needed just to get back to even, that's a very hard cliff for most to climb.

Anyway, if the strategy is good why risk a large amount? Why not use the power of compounding to create the big money. Plus, doing it that way would make the strategy easy to trade. 4 losses on the trot, no problem, the 5th trade should be easy to take. Remember, there's more to successful trading that buying/selling at the right prices, although of course that does help

Black Swan · Apr 19, 2011

anley said:
It would be fine to have £1000 and risk 5%+.

Remember, there's more to successful trading that buying/selling at the right prices, although of course that does help

Actually, you've accidentally nailed it there, when you consider it that's all trading is..

The OP doesn't mention if he's trading FX, equities, futures or indices. If it's FX then he could (should imho) trade using his first grand only at 0.5% risk per trade by opening a micro with Alpari, Oanda, FXCM etc...

donaldduke · Apr 19, 2011

As the OP is Bill Gates, when he says £1 pp, he must actually mean £1million per point, or about 30,000 ES contracts per trade.

I would recommend he start with a small £1 billion pound account, as he is only going to be risking £38 million per trade.

amit1986 · Apr 19, 2011

donaldduke said:
As the OP is Bill Gates, when he says £1 pp, he must actually mean £1million per point, or about 30,000 ES contracts per trade.

I would recommend he start with a small £1 billion pound account, as he is only going to be risking £38 million per trade.

MM and increasing size

Billy Gates

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anley

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Billy Gates

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anley

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donaldduke

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Black Swan

anley

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Black Swan

donaldduke

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amit1986

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