2% or not 2%

This is a discussion on 2% or not 2% within the Trading Systems forums, part of the Methods category; Slightly more than 2% risk... 1st place being up 231% in <4 days. https://www.fxcm.com/uk/advantages/m...ading-contest/...

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Old Aug 4, 2016, 9:59am   #61
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Slightly more than 2% risk... 1st place being up 231% in <4 days.

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Old Aug 4, 2016, 10:23am   #62
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Originally Posted by f2calv View Post
Slightly more than 2% risk... 1st place being up 231% in <4 days.

I won 3 of these competitions did more than that but surely no one can keep up the performance like that on a regular basis ...
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Thanks! The following members like this post: f2calv
Old Aug 4, 2016, 10:27am   #63
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Originally Posted by tar View Post
You can make good money trading your own account but you will make much more if you can translate that talent into business - trading - with others thats what i meant ...

Yes agree with this. But you still need MM, otherwise failure could be imminent.
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Old Aug 15, 2016, 6:42am   #64
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Whatever style you use to recover (Martingale, Hedging...) it has to be based on the way you trade (breakouts, fading......).

Good traders focus mostly on exist and money management rather when entries because they know sh@t can happen and can happen many many times despite the degree of understanding of the market and that will also have an effect on his mind not only on his capital.

Successful recovery is a skill and it is not easy but for the retailer trader it is the only to support his edge.

Last edited by Fugazsy; Aug 15, 2016 at 11:21am.
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Old Apr 27, 2017, 9:09pm   #65
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Originally Posted by tomorton View Post
We should all know the 2% rule. Devised by Dr Alex Elder. Says capital risked per trade should be not more than 2% of your total account.

I have followed this rule and quoted it here and elsewhere. My own current trades are running at about 3% risk on average - I'm not a novice but still conservative and still trying to respect the rule. But we shouldn't give unquestioning faith to any rule in trading.

First off, this rule first appeared in print no less than 23 years ago in "Trading for a Living", by Dr Elder. His name started to become known in the late 80's. His trading obviously pre-dates the launch of his website in 1988. That passage of time on its own should qualify for this to be re-visited.

Dr Elder is a psychiatrist who trades. Nothing wrong with that, but he is bound to bring a psychological viewpoint to his writings. It's therefore very possible that the major benefits of following his teachings are protection from negative psychological impact, rather than wealth generation.

Dr Elder's knowledge and experience in trading are derived from the US private trader's viewpoint. This is not necessarily going to be universally reflected by traders' conditions in other countries.

His experience pre-dates the huge increase in private trading in the late 1990's. I don't say good trading rules should have come out of the frenzied daytrading of the tech bubble, those were atypical market conditions, but some things in the game have changed since then.

His experience was (I think) derived from going long on US stocks in the late stages of a decades-long bull stock market and US economic expansion. As far as the markets were concerned then, I'm sure the feeling was this was never going to end. But being a long-only one-country share-buyer probably doesn't count as trading as we now understand it. How relevant is buying shares in a bull market to trading both ways on the huge variety of other instruments we can now access?

Sorry if I've taken a swing at your personal guru, but I suspect those of us who know the rule also break it every trade. Don't you?
I read his book/s and saw his site many times , with all the very expensive trading courses .I am glad some people believe he was a trader , but the only thing I saw was another author , course seller and educator and the only evidence I see is making money from courses , books ,videos and consultations.Good luck to him for making money!

Even his method of indicators and moving averages does not have any edge .Those who can, do; those who can't, teach.
Prov. People who are able to do something well can do that thing for a living, while people who are not able to do anything that well make a living by teaching.

I was very dissaponited with your Guru and his books .I learnt nothing from him about trading psychology , I wonder how much of it he knew , and how little his followers can learn from him.The only thing to learn was you need discipline , god was I happy , I told all the pub crowd drinking their money " you need discipline! " , they bought more drinks and did the opposite.Does it work ?You need discipline for trading.

If he was any good as a psychiatrist , he would have told you more about psychology.He would have told you , the 2% is theoretical figure , if he was a real psychologist , he would have told that in reality , your brain is not in reality with the markets , that your primitive brain is not rational about money , it gets into a weird state when it smells money.Therefore , the 2% does not work ,just follow the 2% discipline and keep buying my trading courses from my site.

Search on google for "Weird Things Money Does To Your Brain"

I know traders who have put on larger trades ,than their system 2% set position sizes , simply because their brain command centre is shutdown or is shortcircuiting in a stress response.

An Amygdala Hijack is an immediate and overwhelming emotional response out of proportion to the stimulus because it has triggered a more significant emotional threat. The amygdala is the part of our brain that handles emotions. During an Amygdala Hijack, the amygdala "hijacks" or shuts down the neo-cortex (the command centre of the brain).Mistakes are made especiality when your brain is not in reality

Last edited by foroom lluzers; Apr 28, 2017 at 9:13am.
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Old Apr 29, 2017, 3:23am   #66
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The 2% is too high to be used for amateurs.This should be around 0.2 % .

Traders make mistakes , mistakes make traders underperform , subconcious errors and underperformance versus expected back tests due to psychology will result in losses .


Why Isn't Everyone Making These Returns?

Because people make mistakes. The average person will never achieve anywhere near the expected return from their system because they make mistakes.
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Old Apr 30, 2017, 11:06am   #67
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The 2% rule means losing that percentage if a trade goes against you. It was meant as a maximum, not minimum risk, and used by pros and pit traders, not amateurs. I think was first mentioned in Market Wizards.

The actual stop should not be 2% rule but as this expert says " is dictated by technical analysis or other factors,"


So you can have 2% equity risk but 3% stop-loss or whatever. His formula determines the number of contracts/shares to buy/short. The risk % and stop-loss eventually determine how well capital is utilized. The article shows that small % risk results in less capital being employed if stop-loss is higher. Usually you do not want that but maybe good for beginners.
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Old May 1, 2017, 7:48am   #68
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The FSA knows these theoretical 2% figures won't work in practise , hence new controls are required.The FSA wants the majority of traders to lose less .


The 2 % is theoretical and is taught by educators , vendors and books , but these people are not real traders , so should you listen to them?I certainly would not .They don't even know why and how the majority lose.

Even with 2 % , traders are clever , they will try to get better returns driven by emotions and psychology of stress.After taking into account mistakes , underperformance due to inappropriate back testing , and psychological issues , the 2 % should be reduced by 0.5 % for each of the above three factors .That would give a maximum of 0.5 %

Some of the losers below of approximately 70% plus would gain.A google search would probably show 95% lose , so just search on google for 95% lose psychology.The 95% lose number is spot on according to every futures broker I have worked with and they should know since they have access to all the accounts.

Here is an example of a person showing you evidence , that traders will not follow their set % trade risk , due to their primitive amygdala (emotional brain).


I learn from highly educated Doctors phds etc about the psychology of trading , but I also read from non trading psychologists , instead of learning from other genuises on forums "providing half the information" and half information is dangerous , in trading that results in losses.
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