Risk per trade

[Schopen]

"'Never risk more than 2% of your capital on any one trade'... and similar rules.
Do they mean % trade size of your total equity, or % maximum loss as a % of your total equity, cause the latter could imply your trade can be as much of your capital as you like, as long as your max loss per trade is 2% of your total.(?)
I like the first better but 2% must be at least the smallest tradeable size given your leverage which could/should be low so just how much wonga are you meant to start with(!)?

 

[Vaco]

its the second.

I'll use a spreadbet example

On a £10,000 account your max loss per trade should be £200 so how many points away from your entry you are planning to place your stop loss will determine how many pounds per point you are going to trade with.

If your sl is 50 points then you would trade no more then £4 per point.

I would start with 1% though for the first year at least. you will then have a know what your worst run has been. double it and ask yourself 'if I increase the risk per trade would I be comfortable with the drawdown from such a bad run. The answer will tell you whether its right to increase risk or not.

 

[Countvonaltibar]

Good advice from Vaco & certainly one of the rules that new traders find it hard to follow reference money management. I know as I was one!

 

[intradaybill]

"'Never risk more than 2% of your capital on any one trade'... and similar rules.
Do they mean % trade size of your total equity, or % maximum loss as a % of your total equity, cause the latter could imply your trade can be as much of your capital as you like, as long as your max loss per trade is 2% of your total.(?)
I like the first better but 2% must be at least the smallest tradeable size given your leverage which could/should be low so just how much wonga are you meant to start with(!)?

This is a good article with a couple of examples;

http://www.tradingpatterns.com/Literature/PositionSizing.pdf