1% vs 2%

[ForexProdigee]

I was curious about what risk I should take on any given trade. Well, those of which are acceptable to any given strategy. The part of me that says 2% feels like my Greed lol even though its only a 2% loss. I prefer 1% a little because a bad ratio of 1W:2L leaves me at break even if my R/R is 1:2. Maybe it's sort of a comfort level. Which do you guys prefer?

 

[VielGeld]

0.5%.

 

[Gavroche]

I was curious about what risk I should take on any given trade. Well, those of which are acceptable to any given strategy. The part of me that says 2% feels like my Greed lol even though its only a 2% loss. I prefer 1% a little because a bad ratio of 1W:2L leaves me at break even if my R/R is 1:2. Maybe it's sort of a comfort level. Which do you guys prefer?

The risk % have to be part of your trading plan. As a simple step, should be 1-3% of the trading capital It is also important what trading capital you have, maybe 1% will not allow you to trade. It depends what R/R ratio you average and what W/L you have. It is also important to remember that trading only one contract is not a good idea, should have at least 2, one with a profit target and the other one as a runner.

 

[ForexProdigee]

0.5%.

Hmmm.. I've never considered that. It would be extremely difficult for an account to be blown with .5%.

The risk % have to be part of your trading plan. As a simple step, should be 1-3% of the trading capital It is also important what trading capital you have, maybe 1% will not allow you to trade. It depends what R/R ratio you average and what W/L you have. It is also important to remember that trading only one contract is not a good idea, should have at least 2, one with a
profit target and the other one as a runner.

Yes, having upwards of 3-4 even. Only if the risk is once again adjusted to accommodate for the 1% or 2%. I need to execute a week of trades and record my W/L and make a decision then. You're right. I need to input the exact risk into my plan eventually.

 

[Gavroche]

Hmmm.. I've never considered that. It would be extremely difficult for an account to be blown with .5%.




Yes, having upwards of 3-4 even. Only if the risk is once again adjusted to accommodate for the 1% or 2%. I need to execute a week of trades and record my W/L and make a decision then. You're right. I need to input the exact risk into my plan eventually.

Yes, is a good idea. I'm suggesting to do some testing (1 week at least) without changing the %, than do another test with a different % ( keep it the same during the test) and see winch one is a better choice.
Please , never change your % during a trading day, it can be very costly.

 

[Giovan]

Some hedgefund trader once told me that if you wanna live longer in the trading world,
never expose more than 2% of your account and always have enough cash to make trading worthwhile.
Eg. 2% of $1000 is a mere $20. You can barely make anything out of this compared to 2% of 20000 which is about 400.

So in brief, have enough capital and keep it to 2% Max.

Giovan

 

[ForexProdigee]

Thanks for the input guys. I'll test 2% Risk then 1% and decide accordingly. Risking anymore, like Giovan, isn't ideal.

 

[DitterPD]

Some hedgefund trader once told me that if you wanna live longer in the trading world,
never expose more than 2% of your account and always have enough cash to make trading worthwhile.
Eg. 2% of $1000 is a mere $20. You can barely make anything out of this compared to 2% of 20000 which is about 400.

So in brief, have enough capital and keep it to 2% Max.

Giovan

But shouldn't we differentiate between hedge funds and our retail FX brokers?

Good question, don't you think?

 

[Giovan]

But shouldn't we differentiate between hedge funds and our retail FX brokers?

Good question, don't you think?

Good question. Not exactly. Limiting exposure to a 2% Max is the first rule. In hedge funds, this is more complex in that cumulative exposure is calculated from hundreds of trades,( both winning and loosing positions), and this is never done manually.
retail traders on the other hand are less likely to have more than 10 trades open,while sticking to the 2% rule. This is attributed to manual trade management, and low trading capital leading to traders overlooking the importance of the 2% rule.

I would be more careful if I can loose $200K in a day than I would if all I can loose is $100.
Bottom line 2% max is not negotiable, everything else is relative.

Giovan

 

[NVP]

whatever you feel comfortable with dude ...........but generally 2% max in my camp ....and yes multiple trades is a whole different question as you are exposing much more then..........and trying to apply a non-correlation comfort blanket can be a very dangerous and naive strategy

N