what percentage should i risk on each trade????

[kagein]

what percentage of my capital would you recommend that i use on each trade?

 

[shadowninja]

I've seen recommendations of <10% for balances < £10k and <1% for balances over £10k... it allows for drawdown plus experimenting/getting used to the system you use.

 

[Trader333]

This depends on timeframe. When I trade intra-day I never risk more than 0.2 of 1% of my account per trade. For longer term position based trading I will go as high as 2%. The real key is to know the volatility of the market in the time frame you are trading and position your trade size relative to this.


Paul

 

[Rhody Trader]

The previous posts make important points on the topic. The thing I would add in to the discussion is the performance of the system/method - specifically the length and duration of drawdowns. To really make a good judgement of how much risk to take it helps enormously to look at the worst case scenario drawdown for a given risk level, see if you can stand it, and see how it measures up against the type of returns you'd expect to see.

 

[kagein]

so lets say i had $10,000 account with 100:1 leverage and i was trading intra-day would i trade 1% of the 10,000 so $100 per trade or 1% of the leverage.

 

[Rhody Trader]

You're confusing risk and position size. They are not the same thing. When someone says they are risking 1% that means on a $10,000 account the are risking $100. That, in turn, means they are taking a position of such a size that the points/pips risked translate in to a $100 risk.

 

[shadowninja]

You're confusing risk and position size. They are not the same thing. When someone says they are risking 1% that means on a $10,000 account the are risking $100. That, in turn, means they are taking a position of such a size that the points/pips risked translate in to a $100 risk.

Yep, and so if you had a 10 point stop, you could bet £10/point. A 1 point stop means £100 /point. A 100 point stop means £1/point. The stop would be determined by the instrument you're trading, placing the stop to cater for the "noise".

 

[kagein]

ahhh...makes perfect sense now....thanks

 

[zagreb]

for scalpers (with sub $ 5,000.- acc.) supposing that you put reasonable cca. 10pip stop, average bearable risk may be 2-3% per trade. For acc's 5-10K $ risk would be in the range of 1-2% and over 10K risk may be up to 1%.

When risk is 2-3%, usual leverage is 1:20 to 1:30. For risks up to 1% leverage is 1:10 and less.

This will ensure longevity while still earning quite interesting sums - ofcourse if trader knows what he(she) is doing. If not, risk is always unlimited.

For swing traders parameters are about same, but since stops are usually bigger, earning potential is weaker (let's say 1/3 of above mentioned). But swingers spend less time behind screen. Everybody gets what he wants

 

[EFXandy]

Exactly!

You're confusing risk and position size. They are not the same thing. When someone says they are risking 1% that means on a $10,000 account the are risking $100. That, in turn, means they are taking a position of such a size that the points/pips risked translate in to a $100 risk.

Very well said. Very well.

Andy

 

[JTrader]

1% to 2%. 2% max i think. Unless your strat has a proven very high % of winners over a significant period.

 

[FXSCALPER2]

Risk is about psychology. When you are risking 1% of your capital, you are presumably protecting yourself in such a way that it will take you hundreds of losses in a row (or in aggregate) to lose all your trading capital. When you think about it, this is really about staying in your comfort zone. If you know the next trade will make practicaly no difference to your life or even you trading account, it should help you be detached from the outcome of that trade.

So, when considering how much to risk on a trade, keep in mind that, unless you are risking an unreasonable amount (say 10%) of your account, the difference you will make is going to be on how volaltile your equity curve is going to be rather than how successful you will ultimately be.

 

[omni]

you should calculate your VAR (google to find calc) and move accordingly, also i suggest analysing your beta's if you are equity based (especially if you use indexes for hedges).

the above all talk of 1% risks or there abouts...... to put a spanner in the works....... i run 25% risk (ie. i put out 25% of my fund size) and have done for over a year.

not every trading style would work on 1% risk profiles.

regards.

 

[PualoP]

Just to expand on the thread a little, I've always seen alot of discussion about 'per trade' risk but what about total portfolio risk?

e.g say I risk 1% of my account per trade, what is an acceptable amount of trades to have on at any one time 1,2,10, 40 ?

I think Edler said in "Come into my trading room" that 6% was an acceptable amount but seemed a little arbitrary to me?

 

[shadowninja]

you should calculate your VAR (google to find calc) and move accordingly, also i suggest analysing your beta's if you are equity based (especially if you use indexes for hedges).

the above all talk of 1% risks or there abouts...... to put a spanner in the works....... i run 25% risk (ie. i put out 25% of my fund size) and have done for over a year.

not every trading style would work on 1% risk profiles.

regards.

Well, theoretically, I risk 80% of my fund size every time, only because I only leave enough in the balance to cover the trade I intend to do, and keep the rest in the bank.

 

[Rhody Trader]

e.g say I risk 1% of my account per trade, what is an acceptable amount of trades to have on at any one time 1,2,10, 40 ?

It depends on the correlation of the positions. If you're risking 1% per trade and have 10 positions open which all move the same way you're basically risking 10%.