High % Risk and Compunding

[Scotty2Cues]

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.

 

[new_trader]

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

...all these magic formulas...

 

[SpiritBeing]

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/fir...urns-per-month-lets-talk-money-managment.html

Check it out.......ps what techniques & styles do you intend to use?

 

[Scotty2Cues]

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/fir...urns-per-month-lets-talk-money-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

 

[Masquerade]

lol, 25 pips=20% of account. Good luck with that

 

[Scotty2Cues]

lol, 25 pips=20% of account. Good luck with that

its 4% of my total account though

 

[Masquerade]

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

 

[Scotty2Cues]

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

Obviously the whole account grows as the 20% part grows, but the % risk on the whole account will also grow. I suppose its like starting off with a little risk then increasing the risk as you get more of the casinos money. Say the high risk part doubles, then 25% of that equals 8.3% of the whole account.

 

[SpiritBeing]

its 4% of my total account though

4% per trade is still rather meaty IMO

 

[traderman1]

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.

.

The best of British luck to you. I hope that it trades well for you. We are all cheering you on. Go team.

Keep us up to date on your progress with this trading style.






(I give it less than a week before it is a busted account).

 

[iota]

This sounds like when my wife goes shopping and tries to explain how she's actually investing because the pile of overpriced tat she bought saves her buying greater quantities of cheaper tat in the future.

Hopefully your account fares better than when my wife's been let loose on ours.

 

[megamuel]

Good luck Scotty, *** the haters x

 

[wackypete2]

20% is a bit much. You just don't have much room for error. With some luck and good timing you could probably get away with 10% for a while if you catch a nice run, but eventually you're going to get bit. Good luck, though. It would sure be exciting if you actually do it!

Peter

 

[Hotch]

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

Where did you get that formula? I'm just wondering who couldn't figure out that (W+L) = 1

 

[scose-no-doubt]

Don't you think you should scale down your size a bit? 25 pips is a fart in a storm.

 

[Scotty2Cues]

I'm just wondering who couldn't figure out that (W+L) = 1

I should of mentioned that I will be moving SL to BE after a number of pips so W + L does not equal 1 if you include moving stop to BE. This reduces variance and means I can risk more

so W + L + BE = 1 where BE is probability of getting stopped out at BE

 

[Scotty2Cues]

Don't you think you should scale down your size a bit? 25 pips is a fart in a storm.

SL will depend on situation but will prolly be between 15-50 pips but more like 25-45 or so. On a decent setup I will be aiming for a small SL, if price goes beyond that, I think the resons for taking the trade are invalid

 

[Scotty2Cues]

I'm just wondering who couldn't figure out that (W+L) = 1

Because W + L does not equal 1 if you include moving stop to BE which I do. This reduces variance and means I can risk more

so W + L + BE = 1 where BE is probability of getting stopped out at BE

also if b = probability of getting SL to breakeven after so many pips and
s = probability of reaching take profit once SL moved to BE then

W = b*s

L = 1 - b

BE= b*(1-s)

and so we just need values for b and s

 

[Hotch]

I'd been informed that the assumptions of Kelly fall apart if you include break even, took it for granted, only reason I brought it up tbh. Doesn't effect me so I never verified it.

 

[Scotty2Cues]

I'd been informed that the assumptions of Kelly fall apart if you include break even, took it for granted, only reason I brought it up tbh. Doesn't effect me so I never verified it.

It doesent fall apart at all, it just changes the original equations slightly; not difficult to extend the original case so that BE is included...