Hotch
Experienced member
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Scholes' many formulae served him well at LTCM. :clover:
I hope your maths works better for you.
Pazienza
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Maffs is well boring innit. I'm gonna be a footballer anyway so I don't need no maffs. Brap brap.
True, hopefully it can work for you.
Tantalos
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L
Liquid validity
When you exceed the level of risk of your performance record, that is too much.
2% is a good solid safe base level to start from.
Really, it should be based on a number of factors:
Drawdown.
Sharpe ratio.
Strike rate.
Max consecutive winners.
Max consecutive losers.
Average win / loss ratio.
For me that is the only decent way to properly assess risk based on non curve fitted backtest
and walk forward testing of a decent sample size (500-1000, 300 as bare minimum).
Once you know the above, that doesn't mean you have a concrete risk level for your methodology
going forwards, all it means is you have a statistically valid base to go forwards based on past results.
It may transpire that 3%, 1% or even 0.5% would be a better risk per trade for you.
I still voted 2% as its the safest starting point.
2% is a good solid safe base level to start from.
Really, it should be based on a number of factors:
Drawdown.
Sharpe ratio.
Strike rate.
Max consecutive winners.
Max consecutive losers.
Average win / loss ratio.
For me that is the only decent way to properly assess risk based on non curve fitted backtest
and walk forward testing of a decent sample size (500-1000, 300 as bare minimum).
Once you know the above, that doesn't mean you have a concrete risk level for your methodology
going forwards, all it means is you have a statistically valid base to go forwards based on past results.
It may transpire that 3%, 1% or even 0.5% would be a better risk per trade for you.
I still voted 2% as its the safest starting point.
So bed sit .... when you moving into a studio???
Very soon, very soon... I've been trying all the time - see how I've tried to learn about the risk.
What about you T? Have you managed to escape from Tartaros?
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Thanks LV.
All that calculations require some serious analysis and too much thinking - it gives me headache.
I'll try to stick to 2% - that's the most popular choice among 10 kind members who participated.
L
Liquid validity
True, arguable whether or not its essential anyway.As JRP said - drawdown is probably the most important anyway.
As JRP said - drawdown is probably the most important anyway.
I risk 0.5%-5% depending on the setup. I s**t myself every time on the 5% setup, but it's success rate is very high. My risk is actually going down more and more. I don't like compounding much. I risk more when i reach landmarks, but my % of account risked doesn't go up anymore than when i first started.
There are 2 members who risk 10% of their accounts per single trade.
It would be interesting to hear about their trading experience - if they manage to keep emotions under control when the loss comes close to 10% of the account. Also I would assume they haven’t suffered 10 losses in a row - is this assumption wrong - maybe they kept opening new accounts after blowing up?
PS 10% or more I used to risk with my demo account - once I made 62% overnight.
It would be interesting to hear about their trading experience - if they manage to keep emotions under control when the loss comes close to 10% of the account. Also I would assume they haven’t suffered 10 losses in a row - is this assumption wrong - maybe they kept opening new accounts after blowing up?
PS 10% or more I used to risk with my demo account - once I made 62% overnight.
jthetrader
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It really depends on why you are trading doesn't it? If I was trading to make a living I'd have a different attitude to risk. If you have £1,000 in your account and you put £200 on the line, if you lose you lose if you win you win (depending on how much you make you've just lost between 1 week and less than a day's salary). If you have £100,000 or £1 million in your account and you put down £20,000 or £200,000 on one trade you would either need to be a lucky *******, a genius or a complete moron. If you were an adventurous pensioner I suppose you could put your £500,000 pension pot into forex.
And when you say risk do you mean risk as in position size or how much you put down as a margin? On a £1,000 forex account you have £100k worth of positions you can take out, so a £1,000 position (in theory risking all of your capital) would cost just £10 to set up.
When I get round to getting my real account sorted out I'll probably fit somewhere between complete gambler and prudent investor. Let's face it, £1,000 isn't going to make me a millionaire no matter what I do, but I've got more chance of turning it into £5 grand if I put it all on the line; otherwise I may as well just put it in the bank or in blue chips. Then again mommy and daddy are going to think I'm a **** if I announce I just lost everything on one trade.
And when you say risk do you mean risk as in position size or how much you put down as a margin? On a £1,000 forex account you have £100k worth of positions you can take out, so a £1,000 position (in theory risking all of your capital) would cost just £10 to set up.
When I get round to getting my real account sorted out I'll probably fit somewhere between complete gambler and prudent investor. Let's face it, £1,000 isn't going to make me a millionaire no matter what I do, but I've got more chance of turning it into £5 grand if I put it all on the line; otherwise I may as well just put it in the bank or in blue chips. Then again mommy and daddy are going to think I'm a **** if I announce I just lost everything on one trade.
jthetrader
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Imagine if it had been real money and you'd risked your whole account. This is the stuff of my dreams, never happens to people though
I once did a 300% return over a weekend on fxtrader.investopedia.com but I risked a lot. I had grown my account, conservatively, from the fictional $100k to $400k and I went to $1.6 million when the markets reopened. Lost much of it back though, trying to get a 300% return on capital invested again.
Hi J The Trader.
Maybe it's the easiest way if I show you my understanding of the risk by explaining one of the trades I took today:
1) observing hourly eu chart I could see rejection of 23.6% Fibonacci level (there was an inverted hammer with a long wick going through the level and my idea for an entry was at the close of the next bearish candle after the inverted hammer)
2) at that point (closure of the second candle) I knew exactly where I was going to put the stop (above the inverted hammer high) and where my 1st and 2nd target were.
Distance from my entry to the stop was 66 pips. At that time I was ready to risk losing 66 pips x stake.
Let's say I have £50,000 on my spread betting account and I feel comfortable with risking 2% of my account on this trade. 2% is £1,000 and the distance is 66 pips. I do some basic calculations and come to the size of my stake:
£1,000 / 66 = £15.15
So if I'm unlucky and the price hits the stop I lose £1000 or 2% of my account
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Imagine if it had been real money and you'd risked your whole account. This is the stuff of my dreams, never happens to people though
I once did a 300% return over a weekend on fxtrader.investopedia.com but I risked a lot. I had grown my account, conservatively, from the fictional $100k to $400k and I went to $1.6 million when the markets reopened. Lost much of it back though, trying to get a 300% return on capital invested again.
I can't imagine that JTD.
Good luck is very important, but not enough to succeed in trading. The market can be brutal sometimes. Preservation of capital is the most important IMO.
jthetrader
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You can check me out if you want, I'll send you my account name, I'm in the top 20 of 139,000 players.
Much depends on whether you fade the market or seek to jump on trends (ie if you mean to enter a trade before or after a turning point). If you fade, you would anticipate initial drawdown, and probably tolerate higher drawdown, waiting for exhaustion. If you follow trends, but discover you are wrong, you probably want to be out quickly.
I have been in serious drawdown on single trades (ie of the order of 20%+ where stopping out is a very compelling argument only to see the trade recover if not all then most of its losses). If I had got out at 10% or 15% or 20% I would have lost out. But I would only tolerate this in markets that display a lot of reversion. If I'm going to fade a market, I would only fade it if it shows a tendency to revert.
It's an interesting question, but there is no optimal % either way. I think it is remarkably difficult to formulate general rules about markets/trading, other than to say that (i) all markets move both ways, (ii) market makers can usually extract a profit and (iii) options tend to lose value over time.
I have been in serious drawdown on single trades (ie of the order of 20%+ where stopping out is a very compelling argument only to see the trade recover if not all then most of its losses). If I had got out at 10% or 15% or 20% I would have lost out. But I would only tolerate this in markets that display a lot of reversion. If I'm going to fade a market, I would only fade it if it shows a tendency to revert.
It's an interesting question, but there is no optimal % either way. I think it is remarkably difficult to formulate general rules about markets/trading, other than to say that (i) all markets move both ways, (ii) market makers can usually extract a profit and (iii) options tend to lose value over time.
jthetrader
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So your upside potential isn't limited? I.E. you haven't said, "At this point I'll take my profit"? Do you not take the same risk with all trades? E.G. 2% of capital?
I think if I were doing this I would need to adhere to a strict set of rules, i.e. this much capital and no more; otherwise I would end up chasing my losses by doubling up, and end up out of money very quickly. Surely the temptation is there, when you're confident in a trade, to stake more than you know, in your rational thoughts, you should?
bedsit said:
Okay and what if, hypothetically, your stop loss comes during the middle of a massive sell-off? You could, in theory, lose more than 2% of your account, correct?
