How do you calculate best optimal MM risk % per trade?

[eurgbp]

How do you calculate best optimal MM risk % per trade?

I've got 1000 USD and a strategy that makes sense and has a good profit factor.
But how do I calculate best optimal fixed fraction % for it?
Clearly if I risk 1% or 2% per each trade, I am not going anywhere and equity is not utilized at its fullest potential...
on the other hand if I trade let's say risking 90% of equity on each trade, I am playing with fire and about to blow up my account, right?
So how do you calculate best MM FF% ?
What do you use for educated guess then?

 

[tar]

I look at SL/ATR .

What markets you trade and how many points is your SL .

 

[eurgbp]

Stoploss 200 points or 2000 pips, since it is 3/5 digits broker
USDJPY pair
initial balance 1000 USD

So you look at SL and ATR then decide randomly what Risk % MM to trade for your strategy?

 

[tar]

1%

 

[tar]

If your sl is 20 pips 0.25%

 

[eurgbp]

1% is your risk?
does not make sense, you are not using your money efficiently

 

[tar]

With 200 pips SL yes 1%

 

[tar]

1% risk on your account means you are willing to lose $10 in a trade .

 

[tar]

Its your money you can risk your whole account ...

 

[Forexmospherian]

How do you calculate best optimal MM risk % per trade?

I've got 1000 USD and a strategy that makes sense and has a good profit factor.
But how do I calculate best optimal fixed fraction % for it?
Clearly if I risk 1% or 2% per each trade, I am not going anywhere and equity is not utilized at its fullest potential...
on the other hand if I trade let's say risking 90% of equity on each trade, I am playing with fire and about to blow up my account, right?
So how do you calculate best MM FF% ?
What do you use for educated guess then?

Hi eurgbp

As tar says - its your money - so its all down to your own experience and previous success and skill levels etc etc.

You say that your strategy makes sense and that you have a good profit factor - so lets look into that more for a start - -ie

How many live trades have you taken using your strategy ??

Have you ever had more than 10 consecutive bad trades ( losses ) in a session or day or week ??

Is the $1000 set in stone - ie once gone - you stop trading and go to another strategy or completely give up ?

How long have you been trading with a live account - weeks / months / years and when you tried it out on demo was it run over 6 months and with over 500 trades ??

Once you have an insight then you can decide how aggressive you want to trade - ie conservatively under 2% stake size - aggressively with say 4% to 8% - or at 10% + purely until you double your account etc

If you were trading with a $50k or larger quarter of a million plus account you would not think of doing the things I mention - but $1000 is not a massive risk or life changing amount of money - so to maximise or optimise your risk per trade all depends on you and how important $1k is too you.

If you can comment on the points raised and your own view - then I can elaborate more

Regards


F

 

[alexaherself]

If you read an introductory, beginners' book like Van Tharp's Trade Your Way to Financial Freedom you'll find 100 pages or so answering this question: it's one of the single most fundamentally important things to understand before trading. Coming up with a method that's profitable is the easy part. The ability to work out your stakes is what determines who actually makes steady money from them and who blows their accounts.

Without seeing the proven/tested figures for your method, nobody can possibly give you a sensible answer to what you're asking here. At the very least, we'd need to know how many trials/trades you've done, what the win-rate was, and the size of the average winners/losers (and probably the variance, as well, unless it's terribly small).

You need to work out how much of a "losing patch" you can tolerate.

Understand clearly that the "longest losing run" isn't the issue here: it's the "longest losing patch" that matters. Runs of uninterrupted consecutive losers are very rare. "Patches" where the win-rate falls below its norm are very common, and the chances of those leading to far bigger losses than the "longest losing run" are typically very, very high indeed. Seeing how much of a losing run you've had and "allowing for a bit more" isn't helpful: as many thousands of people have very consistently discovered, that's a way to blow your account.

Without knowing anything about your system or your figures at all, my own wild guess (and "wild guesses" is all you can possibly get, without detailed information) is that a sensible answer for you is going to be well under 3% and probably under 2%.

 

[tar]

Hi eurgbp

As tar says - its your money - so its all down to your own experience and previous success and skill levels etc etc.

You say that your strategy makes sense and that you have a good profit factor - so lets look into that more for a start - -ie

How many live trades have you taken using your strategy ??

Have you ever had more than 10 consecutive bad trades ( losses ) in a session or day or week ??

Is the $1000 set in stone - ie once gone - you stop trading and go to another strategy or completely give up ?

How long have you been trading with a live account - weeks / months / years and when you tried it out on demo was it run over 6 months and with over 500 trades ??

Once you have an insight then you can decide how aggressive you want to trade - ie conservatively under 2% stake size - aggressively with say 4% to 8% - or at 10% + purely until you double your account etc

If you were trading with a $50k or larger quarter of a million plus account you would not think of doing the things I mention - but $1000 is not a massive risk or life changing amount of money - so to maximise or optimise your risk per trade all depends on you and how important $1k is too you.

If you can comment on the points raised and your own view - then I can elaborate more

Regards


F

10% ?! You wont survive , there is no room for a losing patch !

Love forums !

 

[Forexmospherian]

10% ?! You wont survive , there is no room for a losing patch !

Love forums !

LOL

Well when I have been playing with $200 and $500 dollar live accounts trying to get then up a 1000% in a week - or 5000% in a month -I have used over 10% stake size

I certainly don't recommend it for normal traders - maybe you and me and a few others aye tar - after all we are expert retail FX traders - ;-)))



Now why did I feel I had to get that one in - rofl

Regards

F

 

[NVP]

as the guys say here its up to you but really even having more than 3% out there is foolish if you want to preserve and grow capital base........

as Alexaself says .......even with a good system you need to be able to withstand say 10 losses in a row......or say 10 losses in 15 trades .......if you keep it tight and low % stakes then you will only be 20-30% down and able to trade your way out over time .........

remember even good win ratios of 70%+ still mean big runs of losses sometimes due to the laws of probability

this is why most people eventually withdraw from trading as a decent second income stream ............you need to be turning over a lot of trades to make money (full time)....at only 1-2% of available capital per trade you will need to be a multi millionaire to be trading part time / longer timeframes to make any decent money worth having

N

 

[Solas0077]

More important are the losses due to spread and slippage. With 1000 capital the probability of total loss is 0.999999. if you do not have a serious edge that is proven do not even try. For example read this.

The first question to ask yourself before figuring out money management is the following: Do I have a true edge? If you are not sure, save your money. if you are sure you have an edge that will cove cost and slippage, then try to increase your initial capital.

 

[Forexmospherian]

More important are the losses due to spread and slippage. With 1000 capital the probability of total loss is 0.999999. if you do not have a serious edge that is proven do not even try. For example read this.

The first question to ask yourself before figuring out money management is the following: Do I have a true edge? If you are not sure, save your money. if you are sure you have an edge that will cove cost and slippage, then try to increase your initial capital.

Hi Solas

A good comment - its important that you have an "edge" - ideally more than one edge and its also important you have spent at least a few thousand hours watching the live 1 - 5 mins charts to understand how you can gain so called "edges"

I have read the Price Lab info - and as far as I am concerned you can prove anything with stats - that's if you want to prove it to be good or bad.

I have not had ONE Single losing full trading day in over two and half years - NOT ONE - unusual - buts its possible if you have the experience - and spent the study at the "coalface" and in the so called "noise"

Maybe less than 1% of retail FX intraday traders do that - and so thats why maybe 80 % + FAIL. I have easily spent over 10k live chart hours and will be in this next year coming up to 20 k live trades.

If I had believed all that I read - I would have given up years ago

Yes I have losses - yes my intraday trading is far from being like a normal retail trader - ie either a swing or scalp - I combine both along with advanced money management and can basically follow every pip move through the main European session

The trick is the "devil in the detail" along with ideally an "edge" in every part of the trading session - its all possible - its not easy or simple - but then if it was maybe more and more retail traders would have all the "edges" required to be a lot more successful.

Theorists and analysts can be very useful - but try and go with actual traders who have done it - and still doing it - they are the exception to the rule - but at least then you have faith that its all possible.

Good Trading

Regards


F

 

[sun11]

Once I had this question in my mind. Want to share something.

I have a "Multiple-Losing-Streak-Probability" excel calculator. From where I can gauge what could be my maximum consecutive losses under certain win rate.

Then add that data in my excel expected return calculator to get the following. (example)


Win pips, loss pips are the average SL & TP. Lets say if maximum consecutive losses is 10. Then my account balance should have that capability to deal with it. So I have to set risk% accordingly.