how much money should I lose?
- Thread starter daytraderwavechaser
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yes agree with you , its a good reply with nice information , thanks again for your nice reply.
Though more pessimistic than need be, I think this OP's attitude is still waay better than the more typical attitude of people going into trading with hopes of being successful rightaway.
As a beginner in trading should i trade with an higher leverage since I'm in demo, even though i know the fact that demo and live are different ?
Just for the experience is it a good idea to trade with higher leverage or trading with an average leverage gives the same experience on risk factors and strategical thinking ?
Just for the experience is it a good idea to trade with higher leverage or trading with an average leverage gives the same experience on risk factors and strategical thinking ?
Using more leverage you increase magnitude of impact of price movements on your equity. Hence you increase are potentially increase variance of your returns. Hence you potentially decrease your Sharpe ratio - get suboptimal performance.
Always you will need [email protected] Management. Fund your account always with money you can effort to lose.
by the way , what you think there is any difference between money and risk management ? its all same or any major difference between two ?
Risk is how much money you willing to lose at any given time. Let's say you have a £1000 account and you want to risk £10
that means you risk 1% of your account.
Money management, on the other hand, is how much you want to get in the return of your risk
Let's say you risk £10 and you want in return £20 that means you have a ratio 1 to 2
Exactly, We shouldn't invest more than we are willing to lose. This is a great tip for beginners.
Never thought of how much money I'd lose.
But I'd start slowly and make sure I don't over-leverage nor over-trade.
But I'd start slowly and make sure I don't over-leverage nor over-trade.
Surely, the question is about what you need to prove to yourself you are cut out for trading, and whether your methodology is viable.
If you need to take 100 trades to prove your method as viable, then that is your metric.
If only 50, then that is.
If you can trade for appropriate number of trades, and get some return, and also, if you can stick to your rules for that period, then you're good to properly fund an account.
If your set of trades doesnt give a good return, or you cant stick to your rules, then you can decide how much 50 or 100 trades are worth to you, in terms of initial test capital to lose.
If all you have is £100, then its £1 a trade, or £2 a trade if 50 trades gives you some proof of concept and proof of your ability to stay the course.
Get over those hurdles, then you can decide to properly fund yourself.
Instead of "losing money", think of it as R&D investment.
If you need to take 100 trades to prove your method as viable, then that is your metric.
If only 50, then that is.
If you can trade for appropriate number of trades, and get some return, and also, if you can stick to your rules for that period, then you're good to properly fund an account.
If your set of trades doesnt give a good return, or you cant stick to your rules, then you can decide how much 50 or 100 trades are worth to you, in terms of initial test capital to lose.
If all you have is £100, then its £1 a trade, or £2 a trade if 50 trades gives you some proof of concept and proof of your ability to stay the course.
Get over those hurdles, then you can decide to properly fund yourself.
Instead of "losing money", think of it as R&D investment.
I am not a trader, but I don't think I would ever do that. It's not for me, and it's too risky... I prefer to buy and resell stuff. I am working in this sphere for like five years and I have some experience in selling. At first, I had a lot of money looses, but from the other side it is a forced necessity to have even more income from the future sales. So yeah, at first it is hard, but don't give up, and you will be satisfied by the results of your efforts. Usually, I have to choose offerup vs letgo, because I work with both of these apps. Anyway, I wish you luck with trading.
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Risk :Reward ratio is total b*s*
This is because no sensible trader would use both a fixed SL and a fixed exit TP.
Take the case where price is trending nicely towards your target and gets halfway there before it turns around - would you really just sit there and allow the trade both to go from a 1:1 profit to a small loss and then to a full loss stop out without doing anything?
Think about it this way: If you entered at a good price then lots of other traders will also have entered there. So when price turns against you, it will probably be propelled by traders snatching their profits (if your trade was a buy then profit taking is a Sell). Then once it gets below your entry then there will be other traders stop losses being triggered which again will help to propel price southwards. Other traders will see that this time nobody bought at your entry price and will think the trend has changes and so start selling.
And all the while you will sit there until you are so desperate that you think it doesn't make much difference if you exit now or let it go to the full Stop Loss. The there is a good chance, because most traders put their Stop Losses in the same place (where they have been taught, that price turn again soon after taking out your Stop Loss.
Do you really want to trade like that?
A sensible trader manages their trades - they use whatever system/method to try to read the market and when in profit and the market turns against them they will take steps to avoid a loss For example moving their SL into a Stop-in-profit position, or in the case of a multi-lot trade taking a partial exit and adjusting the SL on the remainder to cover all commissions etc.
This is because no sensible trader would use both a fixed SL and a fixed exit TP.
Take the case where price is trending nicely towards your target and gets halfway there before it turns around - would you really just sit there and allow the trade both to go from a 1:1 profit to a small loss and then to a full loss stop out without doing anything?
Think about it this way: If you entered at a good price then lots of other traders will also have entered there. So when price turns against you, it will probably be propelled by traders snatching their profits (if your trade was a buy then profit taking is a Sell). Then once it gets below your entry then there will be other traders stop losses being triggered which again will help to propel price southwards. Other traders will see that this time nobody bought at your entry price and will think the trend has changes and so start selling.
And all the while you will sit there until you are so desperate that you think it doesn't make much difference if you exit now or let it go to the full Stop Loss. The there is a good chance, because most traders put their Stop Losses in the same place (where they have been taught, that price turn again soon after taking out your Stop Loss.
Do you really want to trade like that?
A sensible trader manages their trades - they use whatever system/method to try to read the market and when in profit and the market turns against them they will take steps to avoid a loss For example moving their SL into a Stop-in-profit position, or in the case of a multi-lot trade taking a partial exit and adjusting the SL on the remainder to cover all commissions etc.
Well Trading isnt a Casino... so it is a very odd question to ask how much money you should put in with the view you lose it all anyway, if that is your view, i would tell you go and do something else and buy yourself something nice... you have to start trading with the view to learn and get better and look after your money. With your current view hard to make it as a trader but happy to answer more of your questions
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