over cautious or over leveraged?.

[Shadowman540]

Can anyone help with this,
Ive been trading a live account for a while day charts end of day etc,
and ive been working on some kind of day trading plan, (I wont bore you with the detail) the recent chf fiasco has made me question position size/ leverage etc.
Iam basically tading of hourly charts (paper trading that is), using a 100k account at .4% risk so £400.00 is the loss.
Stops are 2 x atr and ill move stop to break even and trail the stop.
Trading eur/usd, g30, and usd.
recent trades have been usd £28 per point position size of 39k, win 3k.
eur/usd £10 per point, open profit of £900.00 position size £152k.
G30 £3 per point went to break even.

Are these position sizes ok, should I be making them smaller somehow, iam concerned that should some black swan event happen in the above markets I could be looking at a massive neg equity problem, like some of the chf traders.
Any help would be very much appreciated.
I carry trades overnight as well?
Cheers all

 

[alexaherself]

Maybe I've misunderstood completely (always possible), but it seems to me that something in your figures doesn't quite add up?

If you're trading EUR/USD, for example, the hourly ATR during active hours can easily be 35 pips. So twice the ATR would mean 70 pips for your initial stop-loss?

Nothing wrong with that at all, of course.

But then you say "EUR/USD £10 per pip", which means that your initial stop-loss is (sometimes) about £700, and that isn't 0.4% of a £100,000 account: it's 0.7%, surely?

Anyway, in principle, 0.4% risk-exposure, per trade, sounds conservative enough, and is the kind of figure that many professionals would use. You work that out mostly from your success-rate, allowing for an unusually bad losing run, and so on. You presumably work out the position-size by dividing the percentage of your fund allocated by the number of pips between the entry-level and the initial stop-loss (allowing for dealing costs)?

I don't understand what you meant by "open profit of £900.00 position size £152k", sorry.

 

[Shadowman540]

Entirely possible I got it wrong Alexa.
10 am 13 5 15, atr was at 20 ish, so I doubled it to 40 then yes, divided that by the £400 risk to give £10 per pip.
The open profit is a trade that's still open as of now, and the size of the position was £152k.
Ive read some of your work and liked it, smart cookie.
Thanks for the input.
Cheers

 

[10%Club]

Why would you want to trade with a 0.4% loss limit? Is your system so bad and your belief in yourself so weak that you want to allow for many hundred losses in a row?

You can't make every trade fearing a Black Swan Event and in any case, loss of 10% capital is hardly catastrophic.

Many successful traders use a larger SL than TP, contrary to popular recommendations. But then most people lose money trading so we shouldn't be listening to what most people say...

 

[options-george]

I would suggest to do a google search on "position size calculator". This will bring up many useful and free to use tools to help you understand the concept of position sizing, regardless of account size, timeframes and risk tolerance.

One suggestion I would make is that you adjust your percentage risked per position on the basis of your win rate.

Risking 1% of your account with a strategy that has a 25% win rate is not the same risking 1% with a strategy that has a 60% win rate. Both strategies may have the same edge/expectancy but you would be able to risk more % on a trade for the higher win rate strategy. (do some reading on the Kelly principle if you want to understand further).

Good luck.

 

[Shadowman540]

Why would you want to trade with a 0.4% loss limit? Is your system so bad and your belief in yourself so weak that you want to allow for many hundred losses in a row?

You can't make every trade fearing a Black Swan Event and in any case, loss of 10% capital is hardly catastrophic.

Many successful traders use a larger SL than TP, contrary to popular recommendations. But then most people lose money trading so we shouldn't be listening to what most people say...

The .4% was for day trading( position sizes kept smaller), i use 1% then add to it on day charts, but as far as bad or good system's methods are concerned the best system in the world or best trader in the world wasn't going to mitigate a big loss on something like that swissie in april, iam not super keen on losing everything ive ever had< that's all

 

[10%Club]

The .4% was for day trading( position sizes kept smaller), i use 1% then add to it on day charts, but as far as bad or good system's methods are concerned the best system in the world or best trader in the world wasn't going to mitigate a big loss on something like that swissie in april, iam not super keen on losing everything ive ever had< that's all

Your 0.4% wont help stop a loss on something like the swissie (in January, actually) unless your broker has guaranteed stops. In which case, you could happily have a stop loss of 5% - so your argument makes no sense...

 

[Shadowman540]

.4% and 2500 points to the wrong side and iam still in business, 5% and 2500 points to the wrong side and I owe my crib to the spread betting firm!, does that make sense?

 

[10%Club]

If you are that concerned pay extra for guaranteed stops and then you can happily quadruple your trading size and make more money. If you use a normal broker and MT4, you will automatically be stopped out at between 50% and 90% depending on the broker.

I really don't think you can trade in fear of another 2,800 pip move. You have to accept some risk and in any case, even that has a 50% chance to be in your favour! I actually trade without any stop loss...

 

[Shadowman540]

ok thanks for the input, id kinda come up with that as well