View Full Version : 5% risk per trade?
I had been running through some montecarlo simulations, with various levels of risk. Many people recommend 1-2% equity risk per trade, which is fine. However, is anyone trading over these values? I assessed a trading platform using 2,500 theoretical trades at 5% risk, 50% success rate, 1.25-to-1 reward-to-risk, and the numbers are mind-boggling ($10,000 beginning equity turned into $1b equity).
Of course, at higher risk, your drawdowns are going to be higher. At 5% risk, I saw drawdowns up to 70% or over. I'm unsure whether individuals can bear such losses.
Ideas?
Oh, high flyer as in a performer. Flying high , or flying above the rest... etc.. Figure of speech.
So I was running through several montecarlo simulations, using various levels of risk. Most people recommend 1-2% equity risk a trade, which is fine. But is anybody trading above these values? I assessed a trading platform using 2,500 theoretical trades at 5% risk, 50% success rate, 1.25-to-1 reward-to-risk, and the amounts are somewhat mind-boggling ($10,000 beginning equity turned to $1b equity).
Of course, at greater risk, your drawdowns are going to be greater. At 5% risk, I watched drawdowns around 70% or above. I am unsure whether individuals can bear such reductions....
for monte carlo i use an excel spreadsheet. At 50% winrate and 1.25 r/r you will observe that it is possible to go broke after 100 transactions. This is a bad system to begin with to not mention 5% risk. If it had been 50% and 1.8 reward risk which would be okay.
I used 10%. Down to 5%. I don't reduce bet after losing, so 20 losses out.
Since I'm discretionary, find that bigger bet motivates me and outcomes are better. 1-2 percent toooo little.
However, I go papertrade following 3 net losses from high ie 15%. Ensure that my system okay and then back. Lowest I arrived with this I think was 6 reductions.
Valleys keep little
to get monte carlo I use an excel spreadsheet. At 50 percent winrate and 1.25 r/r you may see that it's possible to go broke after 100 trades. This is a bad system to start with not to mention 5 percent risk. If it had been 50 percent and 1.8 reward risk that would be ok. A profit factor of 1.25 isn't uncommon to get a mechanical system, at least in my own experience.
Also are you sure you're going broke after 100 trades? This is 5 percent risk of present equity, not 5% of starting equity.
A profit factor of 1.25 is not unusual for a mechanical system, at least in my experience.
Are you sure that you're going bankrupt following 100 trades? This is 5% risk of present equity, not 5% of starting equity. Not bankrupt. i misspoken. Nonetheless, it's highly possible you will lose cash in 100 trades.you can lose 8-9 units of risk. Multiply that by 2% and that's a 18% reduction in 100 trades. That system for me is out of the question.
Of course, at greater risk, your drawdowns are going to be greater. At 5 percent risk, I watched drawdowns up to 70 percent or above. I am unsure whether individuals can bear such reductions.
Thoughts? This is an issue with learning to trade. . .too much concept. The only way you will ever know how much you can bear losing is to begin losing. Also, you need to deal with the constant truth of shedding, separate from the cash, beating on your mind. I've been through some very long losing streaks, but hung in since I did not go beyond my reduction limitations.
It is like anything in life, concept is excellent, and essential, but the concept needs to be put in to practice. The concept is then informed by the results and the concept will change. Then more program, more results telling the concept, more adjustments to concept, ad infinitum. It is called praxis. Get to testing and trading those theories.
This really is an issue with learning to trade. . .too much theory. The only way that you will ever understand how much you can bear losing is to start losing. Additionally, you have to deal with the constant fact of losing, separate from the cash, beating on your mind. I've been through some very long losing streaks, but suspended in because I did not go beyond my loss limits.
It's like anything in life, theory is excellent, and necessary, but the theory needs to be put into practice. The results then notify the theory and the theory will change. Then more program,... This men said.
DOn't be an excel spreadsheet trader either. I see a lot of that within this forum.
1-2% risk makes sense only if you're just beginning and don't have any clue to what the hell you do.
As soon as you have an advantage in the market, increase your gaming size! Utilize the leverage but still keep that reasonable risk per your method.
I am new to forex. However, about 2 weeks ago began testing long term charts and utilizing 5%-7% risk free of sl or tp, this of course in demo account. And less then 2 months I am up 60 percent (this is principally as a result of no tp and quite good win ration).
I think its viable in long term if sl and tp is set up and win rate is kept high.
I will try it for few months. If you're not utilizing a stoploss, how can you know how much you are risking per transaction? You must at least possess a plogical SL and after that you need to continuously monitor the transaction.
if you're not using a stoploss, just how do you know how much you are risking per transaction? You need to at least have a mental SL and then you want to constantly track the transaction. Yes had a mental SL, of around 6%. Currently I use sl of around 3%-5%. At the end it all comes down at how confident you are in the particular trade.
5% is much too large.
Max should be 1 percent.
Here is a tip:
1) The major money makers are those that take small profits but on a huge scale. Think 20% p.a on $10M
2) The work form home, worried out, shedding traders opt for home runs by taking on too large risk.
Which side do you wish to be on?
No you can't. Only 30% off losing the lot. Is that the best way to conduct a small business? What about reassurance?
I read a white paper on professional trading and they basically said anythig over a 30% reduction on the acount and it's all over. Should you ever handled O.P.M. they will start pulling money out with more than 15% losses. Therefore why large capital main concern is maintaining drawdowns to less than 10%. Bernie Manderhoffs enormous success was not his gains (12 percent) but the truth that he explained no losses. Shame it was a complete scam.
Of course, at higher risk, your drawdowns are going to be higher. At 5 percent risk, I saw drawdowns around 70 percent or over. I am unsure whether humans can bear such losses.
A profit factor of 1.25 isn't uncommon to get a mechanical system, at least in my experience.
Are you sure you're going bankrupt following 100 trades? This is 5% risk of equity that is present, not 5% of starting equity. I believe that it's more of this premise you've placed on your advantage. 50% gain rate and a 0.25 expectancy is rather the large flyer.
But anyhow, I try to stick to less than 2% myself. On my guide accounts I'm often risking ~0.50-1.50 percent based on how confident I am in the commerce.
Yes, I could exchange for more risk, and yes this would positively impact my returns very much so, but my win rate for scalping is close to 51%, and that I know full well that streaks of 5, 10 losers in a row can happen more often than desirable (along with streaks of champions, which is much more desired obviously but in my head I know they'll eventually even out.) So ideally, I'd rather lean toward funding preservation and handle a losing streak in which it doesn't hurt me overall over a couple percentage points. I like knowing that even in my worst of months, I didn't do much harm in any way.
There are two main thing to think about as well if we look at the plogical aspect of risk:
1) I'm also helping to keep my emotions in check by keeping losses limited, because seeing a bigger drawdown might influence a prospective trading/execution choice. . Such as hunting for a trade to get back in the market when there isn't a fantastic trade to be had, or risking to return some reductions. . .etc... all of the traditional things that kill accounts with time.
2) I'm giving myself a lot of 'fudge' room. The best traders are human and humans can make mistakes. If I screw up something (accidental or by breaking a principle of mine) it doesn't significantly affect my overall returns because I have limited my risk each trade as such. Additionally, if I detect a bad pattern of behaviour, lasting numerous transactions (like a series of revenge trading, etc) then even with the time that it takes to realize this I'm not hurting my account much whatsoever.
If you begin risking more, say 5-10 percent per commerce, and undergo those plogical/human grabs... you might have done some serious damage before you realize what happened. After all, 10 transactions in a row at 5% risk would decimate an account.
I think it's more of the premise you have put on your edge. 50% win rate plus a 0.25 expectancy is quite the large flyer. Hmmm, what can you mean by large flyer? The system is too good to be true? I have probably tested 50 progr in the previous year. Nearly all neglect or show minimal profit, however there were some which produced profit variables in excess of 1.25 over 11 currency pairs out of 2001-2012 (hence the systems are sufficiently robust IMO, with a sample size of 1,000 ). I think 1.25 is very conservative for a tradable mechanical method. I might be wrong, of course.
Hmmm, what can you mean by large flyer? The system is too good to be true? I have probably tested 50 progr in the last year. Nearly all neglect or reveal negligible profit, however there were a few which produced profit variables in excess of 1.25 over 11 currency pairs out of 2001-2012 (so the systems are sufficiently robust IMO, using a sample size of 1,000 ). I think 1.25 is very conservative for a tradable mechanical method. I could be wrong, of course. Query: As not all edges last over time, and in most instances their returns slowly slip in the sound of the market, is 5% risk per trade likely to give you enough space to spot when something is wrong prior to your account carries a serious strike?
Still another consideration: Can you exchange a $100,000 account eager to risk $5,000 (5%) per transaction? If a smaller sized account be any different?
How about risking $50k about a thousand dollar account?
Often people justify risking a larger % of the account if their account is smaller, however in the same time that it becomes more likely their account won't ever see a bigger equilibrium (at least, due to profits that is) due to raising the likelihood that mistakes/errors/losing streaks chop down the account significantly.
I'm not trying to be too strict in what is 'right/wrong' in gambling. . However, I do want to focus on capital preservation as it pertains to the human aspect of trading (errors/rule breaking/emotional trading/etc. .) Since this is posted after all in the 'rookie' segment.
Jack, I have not praised anybody on a forum before but your articles are very informative on a subject that has been in my mind a lot lately.
Thanks for you time and explanations on an acceptable % risk of an account each trade/position. Invaluable.
Query: As not all edges last over time, and in most cases their yields slowly slip into the sound of the market, is 5 percent risk per trade likely to give you sufficient space to identify when something is wrong before your account takes a serious strike?
Still another consideration: Can you exchange a $100,000 account eager to risk $5,000 (5%) each transaction? If a smaller sized account be any different?
How about risking $50k about a thousand dollar account?
Often individuals warrant risking a larger % of the account when their account is smaller, but in the... I conducted a few more Monte Carlo simulations and concluded that 5 percent is excessive. In fact I will probably stick to 0.5% risk. I spent a while over the last few days studying Cashflow Quadrant (Rich Dad Poor Dad series). The key to wealth is not so much in taking huge risks, but in using other people's money (OPM). No person or bank is going to give me cash with 20% drawdown. I will treat my trading because a professional hedge fund and search for an expected drawdown of 10% (max 15%) over my trading life. Professionals try to minimise drawdown when maximising their profit:drawdown ratios. Time to be serious.
What does % risk regardless of when speaking so baselessly. I use 5 percent on systems when I finance an account with 10% of my trading capital so in theory it is 0.5% risk per trade
The idea that 10% or less is considered an acceptable drawdown doesn't make sense to me.
I believe we attempting to use the conventional of hedge funds and institutional traders and implement that to us retail traders. These guys have customers. .
I personally believe 20-30 percent drawdown to get a retail trader is normal. If you choose to trade for others in the future, then that is a different story.
However, for the most part retail traders ought to be able to withstand bigger drawdowns and also can push for bigger gains (excess of 200%).
imo
I believe 5 percent can be done depending on the trading egy. 1-2% is generally thrown out there for beginners since they do not know very much about what to expect from their egy, so it can help to not risk more than this to keep them from blowing before studying how to trade and what sort of drawdown to expect from their own system. Yes , newcomer need to trade with consistently lowest risk , since they do not understand the real market principle and do not understand how much volatile this market . But practical is, they always take huge risk than senior traders for making profit very rapidly . As a result they become failure due to lack of exact risk managing plan.
quote With Regard You're A MADMAN. The trading platform we use produces about an 83% strike rate. Which means its wrong 17 percent of the time. You're aware of the probability of turning heads or tails on a coin in 50% DOES NOT MEAN your probability of hitting tails increases if you flip the coin into heads 5 times in a row. (Also called the Monte Carlo Fallacy) I will find 15 days in my personal journal easily where I had 10 winners in a row. In one single day. @ 5% thats my account stinks. And you believe that this is acceptable risk?? I must respectfully disagree, although I really do see your point. I never said it wasn't riskier, I simply said it might be carried out by a really experienced trader that's quite comfortable with his egy. A trader that decides this risk is worth taking would analyze more than just the attack rate. Historical drawdown for his or her egy over perhaps hundreds of thousands of transactions, may cause the trader to determine that higher risk is worth taking for the higher reward. There are other ways for him or her to reduce such risk. Remember that withdrawing profits from the account can also be a risk reduction egy. The trader may have a sizable reserve in case of a drawdown that you explained above and could easily replenish his account in this even if it is historically uncommon enough. Also, some traders restrict their losses as well. You explained 10 losses in one day. You're assuming this is a day trader and also he would even attempt that lots of transactions in 1 day. Someone trying this would have a hard loss limit to avoid that kind of loss in a short period such as that.
I will find 15 days in my personal journal readily at which I had 10 winners in a row. In one single day. @ 5 percent thats my account stinks. And you believe this is acceptable risk?? Agreed. 5 percent risk per trade is way too high for my liking.
It is not just 10 losses in a row that will halve an account, it has any sequence of trades in which the losses exceed the wins by 10. By way of instance,
L -L -L -L -W -L -L -L -L -W -L -L -L -L
at which there are no longer than 4 sequential declines. At 5 percent fixed frac, that is (0.95)^12 x (1.05)^2 = 0.595 or 40.5% drawdown, from which it would necessitate a (100x40.5)/(100-40.5) = 68% return on the remaining equilibrium only to regain to BE. Not a happy scenario.
I suspect that those who risk upward of 5 percent have not been trading for long enough to go through the disposition of equity change; or so are among the amateurs seeking to grow a small account, where loss of the account could be hauled off and hence risk/drawdown is mostly irrelevant.
quote Agreed. 5 percent risk per trade is far too large for my liking. It is not merely 10 losses in a row which will halve an account, it's any sequence of transactions where the losses surpass the wins by 10. For example, L-L-L-L-W-L-L-L-L-W-L-L-L-L where there are no longer than 4 consecutive deficits. At 5 percent fixed frac, that is (0.95)^12 x (1.05)^2 = 0.595 or 40.5 percent drawdown, from that it might demand a (100x40.5)/(100-40.5) = 68% yield on the remaining equilibrium merely to regain to BE. Not a happy situation. I guess that people who risk up of 5 percent have not... Damn...I am following you around this forum H. I'veta get a grip on my crush you. /tic https://forexintuitive.com/attachments/1526988116.jpg
quote Agreed. 5 percent risk per trade is way too high for my liking. It is not merely 10 losses in a row that will halve an account, it has any sequence of transactions where the losses exceed the wins by 10. For example, L-L-L-L-W-L-L-L-L-W-L-L-L-L where you will find no longer than 4 consecutive deficits. At 5 percent fixed frac, that's (0.95)^12 x (1.05)^2 = 0.595 or 40.5 percent drawdown, from which it might necessitate a (100x40.5)/(100-40.5) = 68% yield on the remaining equilibrium only to regain to BE. Not a happy position. I guess that people who risk upward of 5 percent haven't... Nah, amateurs probably don't have a fixed risk at all! I don't risk that far either anyhow, but I was just playing devil's advoe in stating that it's likely to perform profitably, although very risky and I would not recommend it.
quote Agreed. 5% risk per trade is far too high for my liking. Ed Seykota is thought to utilize 5% per commerce...
Your assumptions are your windows on the world. Scrub them off every once in a while, or the light will not arrive in. - Isaac Asimov
quote Ed Seykota is said to use 5 percent per commerce... Your assumptions are your windows on the world. Scrub them off every once in a while, or the light won't come in. - Isaac Asimov Probably best to have a fact check on that premise. Ed may have only been obtuse as he frequently can be.
https://forexintuitive.com/attachments/15269881251080117835.jpg
From here: http://www.newtraderu.com/2015/04/08/ed-seykotas-10-top-trading-principles/ or herehttp://www.newtraderu.com/2015/02/17/40-best-things-ed-seykota-every-said/
Ed Seykota is thought to use 5 percent per commerce... There is a fascinating essay by Ed on risk management http://www.seykota.com/Tribe/risk/index.htm.
Your assumptions are your windows on the world. Risk/portfolio mathematics is an specific science. It leaves no room for assumptions.
The common motivation to risking more a transaction is profit/greed.
Should you risk more, you have the potential to earn more, and also the potential to lose more.
I recall a plogy trading book (I forgot the name) brought up a question 'Could your account defy 10 losses in a row?' 5 percent risk would mean 50 percent drawdown in a situation like this. It's crucial to variable losing streak as a potential in trading.
Handling the downside chance is the majority of the time more important than the possible profit potential.
If a person is risking 5 percent, a 1-2 risk-reward ratio would mean 10% return in a single transaction, more than what professional traders typically make in a month. Implying you can take a single trade a month and get higher return rate than professional traders. Nonetheless, this really is nothing to be proud of. Actual professional traders will make more money than the trader since their account size is a lot bigger, and they can withstand losing streak while the trader can't since they use appropriate position sizing.
The statistical prospect of account destroy is connected to incremental risk.
In case one needs to earn more money, just put more money into the account, and utilize the correct risk amount to trade. Of course, this can be an issue for undercapitalized traders who must make money from trading.
'I believe 5 percent can be done depending upon the trading egy.'
You have the right to believe or trade whatever way you want.
'1-2 percent is generally thrown out there for newbies since they don't know really much about what to expect from their egy'
Now that is BS.
Go find me a source where a real CP professional trader risk over that.
'Ed Seykota is thought to use 5 percent per commerce...'
Is said? Where did you get that from?
For me, 5% risk reward ratio is not possible because I get only 68% profit ratio from my private trading system! Within my live trading account, I use 1 percent mended risk reward ratio! Because of this, I don't concern about my SL transactions position. Incidentally, sometimes I use 2% once I am very sure about the entry quality.
I fail to accept as true. Each faction of the market is uncertain and volatile,
thus making mended pips risk ration when trading is merely impossible.
5% risk and under of it is more appropriate to be certain a protected trading order but when market moves randomly it may be greater and you don't have any method to reduce and minimize the risk percentage.
5 percent risk and below of it's more appropriate to make sure a secure trading order but if market moves randomly it can be greater and you don't have any way to reduce and minimize the risk percent. Really?
Partial close? partial hedge?
Trading isnt have to be all black and white, TP or SL, you have all the freedom to operate between those 2 lines in the sand however you desire, dont have to be a sitting duck.
For me, 5 percent risk reward ratio is not possible since I get only 68% profit ratio from my personal trading system! Within my live trading account I use mended risk reward ratio! Because of this, I really don't bother about my SL trades position. By the way, occasionally I use 2% once I am very sure about the submission quality. Can you make 68% each month from your own trading system, while only risking 1% of your portfolio?
The appropriate way to figure your lot sizing is that:
Measure 1:
-Test your egy and figure out what the biggest drawdown was to your egy.
Measure 2:
-Decide how much of your account you are willing to risk.
-I advise not to go higher than 25%.
-I advise not to make that amount too high when you have problems with plogy.
-it's true that you will increase your account quicker the higher the number is but the higher that number the more difficult it will be to return from a drawdown in addition to the more difficult it becomes plogy shrewd.
-a few people use 5 percent others 10 percent and some even 25%.
-This amount is called max allowable drawdown.
Measure 3:
-Calculate your lot dimensions so your drawdown will stay inside your maximum allowable drawdown.
-You can increase your lot size as your account grows or reduce your maximum allowable drawdown to risk less. You will likely wish to increase your lot size over time till you make enough and then start lowering your risk as your account is growing.
Hints and hints:
-Have a good sample size when testing your egy so that you receive the biggest drawdown your egy has had before.
-If you have multiple egies and pairs you can set it all together and receive your main drawdown like that. If you do that you may be able to trade at a bigger lot dimensions should you have hedging egies. For example a egy that does well in consolidation and one that does well in trending markets may cancel out a few of the losers making your highest drawdown lower. If you do not have hedging egies you may have to lower your lot sizing because of the bigger drawdown and it may not be worth trading that second egy in the first loion.
-If you do move over you maximum allowable drawdown it is time to review your trading because you may do something wrong or you analyzed your egy wrong.
-You can also apply money management egies in addition to this which could make you grow slower or faster depending on your money management egy so that is something you have to test.
I am sure there is more things I can say about this but this post is getting long and I doubt folks will love this article as most individuals are so put on trading 1% or something so that I will leave it at this.
In the event that you heard anything or appreciated that I want to know.
Thank you for reading.
-
I am a high-risk trader, so obviously I am sharing my train of thought. I would be regarded as the highest risk trader because I admire the law of the sl however I always reverse order when sl is struck. The moments in which I do this is not, arbitrary like I have a perceived calculation of x ray winning greater than y amount of % each trade. As long as you keep everything 1:1 then you should always have a net day in spite of adverse pips.Who wouldn't want to enter a trade in which their likelihood of winning is improved by greater than 85 percent on only reversing your order?
I'm guessing everybody here is interested in math; this is worth a peek
All reality, for example growth 7% of whatever 10 times and it'll double
Therefore risk, 3.5% 2 1 benefit to risk, 10 winning trades and you just doubled your account
https://www.youtube.com/embed/eOykY2SMbZ0?origin=https://www.forexintuitive.com
This is an issue with figuring out how to exchange. . .too much theory. The principal way you will know the amount that can hold up under losing is to begin losing. Likewise, you need to manage the continuous reality of losing, isolate from the cash, beating in the forefront of your ideas. I have undergone a few long losing streaks, nonetheless suspended in on the grounds which I turned out badly my hardship limits. It looks like anything in life, theory is extraordinary, and essential, yet the theory ought to be tried. The results at that point edue the theory and the theory will change.
I'm guessing everyone here is interested in mathematics; this is worth a look All truth, like increase 7% of anything 10 times and it will double risk, 3.5 percent 2 to 1 benefit to risk, 10 winning trades and you just doubled your account Many thanks for sharing that really thought provoking video. I watched the very first 35 minutes or so. Small wonder that Einstein was quoted as saying that compounding was the 8th wonder of the world (e.g. https://seekingalpha.com/article/3802146-miracle-compounding-taking-advantage). With just a little but solid border, vast returns are mathematically possible (more here).
On the face of it, winning 10 transactions at 2:1 RR sounds easy enough. This is exactly the same kind of notion put forward in threads like this one. However, everything else being equal (for instance, if we use random entries and exits) the probability of obtaining a win at 2:1 RR is 1/3 or 33.3 percent (because the SL is approximately two times as likely to be hit until the TP). Suppose we lower this probability to 30%, to allow for costs (spread, slippage,...). Then the probability of obtaining 10 consecutive winners is just 1/(0.3^10) or one chance in 169,350. Possibly not quite as easy as it may seem.
quote Do you make 68 percent each month from your trading system, while just risking 1% of your portfolio? I gauss; his trading egy produces 68% precision (signifies 68 wining trades around the 100).
Generally I try to control my risk ratio by means of my money managing plan, and most of the time I can. Nevertheless, when it's time to scalp I can not keep my risk ratio and fall a fantastic trouble generally because of increasing risk level, therefore now I thinking to quite scalping that always contains unfortunate risk.
Generally I try to restrain my risk ratio by means of my money management program, and the majority of the time I can. But when it is time to own scalp I can not keep my risk ratio and drop a excellent trouble generally because of increasing risk level, therefore now I thinking to quite scalping that always comprises unfortunate risk. Do not open multiple commerce's standing at a time! I had the exact same problem, and now I do not open over two transactions but not in precisely the exact same pair.
Generally I try to control my risk ratio by way of my money managing plan, and most of the time I could. Nevertheless, when it is time to scalp that I can't sustain my risk ratio and drop a great trouble generally due to increasing risk level, for that reason today I thinking to quite scalping that constantly contains unfortunate risk. Same condition that I have. A lot of times I did enormous losses when depositing because of lack of real risk handling plan.
quote Then the probability of getting 10 consecutive winners is just 1/(0.3^10) or 1 chance in 169,350. Possibly not as simple as it might seem.
Then I suspect mepersonally, my spouse and some people whom I understand from that forum are some kind of aliens or something since they can pull 10 in a row; maybe not every time but not as hard/uncommon because you make it seem. .
DISCLAIMER:
OH !! And until you get offended or something (stupid over sensitive world we live in now) im not attaking you or saying you are lying or something similar to that !!
Is merely that practice and theory sometimes they just dont match to each other; therefore the my stage
If you are not mad or offended and you understand my purpose. . then Bypass my disclaimer =)
Subsequently I guess me, my spouse and some people whom I know from this forum are some sort of aliens or something since they can pull 10 in a row; maybe not every time but less hard/uncommon as you make it seem. . As Churchill once said you can't take sides from arithmetic. Anybody with a basic knowledge of probability math can easily confirm the calculation I gave.
People win the lottery from nearly impossible odds. But that doesn't create the probability calculations wrong. Indeed, there are outliers in each statistical distribution.
With trading there's potential to shorten the odds by utilizing a egy with superior entries/exits.
Math has no emotion. It doesn't get offended. https://forexintuitive.com/attachments/1526987193.png
So I was running through some montecarlo simulations, using different levels of risk. Most men and women recommend 1-2% equity risk per transaction, which is fine. But is anyone trading above these values? I assessed a trading platform with 2,500 theoretical trades at 5% risk, 50% gain rate, 1.25-to-1 reward-to-risk, and the numbers are mind-boggling ($10,000 beginning equity turned to $1b equity). Of course, at higher risk, your drawdowns will be higher. At risk, I saw up drawdowns to 70 percent or above. I am unsure whether humans can bear these losses. Ideas? ... 5% if fine should 100% confident about your analysis or in the event that you already understand what you doing particularly if Martingale Money Management isn't used.
quote 5% if fine if 100% confident about your analysis or If you already know what you doing particularly if Martingale Money Management isn't used. 5% isn't fine for 99% of people.
The problem with people here is that they ask questions that they've already formulated the reply to.
It's possible to tell people over and over that they should adjust expectations, but they have in the back of head that it's not 100% accurate, and that they will be OK. Frankly, is it plus they will not.
Does not help that there are so many keyboard warriors with no actual business expertise spouting crap half the time.
quote 5 percent is not good for 99% of people. The problem with people here is that they ask questions that they have already formulated the reply to. You are able to tell people over and above that they need to adjust expectations, but they always have in the back of the mind that it is not 100% authentic, and that they will be OK. Is it plus they won't. Doesn't help that there are several keyboard warriors with no actual business expertise spouting crap half the time. I guess you do not understand my response man. Allow me to repeat. 5 percent is fine only as long as you 100% confident about your analysis or already know exactly what you doing in this trading enterprise.
You will find individuals using from 0.1 to 1% but they nevertheless blowing their accounts. What about this? Can you expect them to go lower than this or overlook this trading?
I am speaking about experienced individuals already in the market. Again 5 percent is good for them.
quote I suppose that you don't understand my reply man. Let me repeat. 5 percent is fine only if you 100% sure about your analysis or already know what you doing in this trading enterprise. There are people using from 0.1 to 1 percent but they nevertheless blowing their accounts. What about this? Can you expect them to go lower than this or overlook this trading? I am talking about experienced people already in the market. Again 5 percent is good for them. I have never seen an account that risked 1 percent and blew their account, and I've observed about 6,000 Foreign Exchange accounts; largely dismissed. Individuals who risk 1 percent invariably lose some trades and take off their stop loss, few months later they are gone. If someone did risk 1 percent and blew their account completely risking just 1 percent per transaction, they are doing something seriously wrong - I certainly wouldn't tell them to increase their risk if they are losing that seriously.
That said a few people risk 5% , and maybe 0.001% of traders that are successful, so long as you are making money it doesn't matter.
There are some high level MM systems that are a egy in themselves that would be the exception, but everything needs to be calculated out to ensure the long-term survival of the account.
quote I've never seen an account which risked 1% and also blew their account, and I've seen about 6,000 forex accounts; mostly dismissed. People that risk 1% invariably lose some trades and take off their stop loss, few months later they're gone. If someone did risk 1% and blew their account entirely risking only 1% per trade, they are doing something seriously wrong - I certainly wouldn't advise them to boost their risk if they're losing that seriously. That being said a few individuals risk 5%, and maybe 0.001% of traders who succeed,... I really agree with you! I also have seen expert traders consistently keep the money management rules very carefully! Utilizing greater than 2% risk reward ratio is truly risky.
quote I really agree with you! I also have seen expert traders always maintain the money management principles carefully! Using greater than 2% risk reward ratio is really risky. Managing 2% risk until closing any order wasn't a simple task , expert trader can handle their risk ratio accurately due to having long term experience. But as a beginner there's no chance to maintain 2% risk for all time , however if we practice more and more above all in demo account there's a possibility to become edued about risk management that could deal with our risk ratio accurately.
Risk ratio does not maintain at all at the exact same position, its constantly volatile. It can be volatile from 2%-5%. But if this calculation increases , then you need to understand you do not understand how to manage risk.
Every Trader is having his own risk management based on which he takes risk of his cash and handle the trade so that he can win maximum pips.
Risk ratio doesn't maintain whatsoever at precisely the exact same place, its constantly volatile. It can be volatile from 2%-5%. But when this calculation increases , then you need to understand you do not understand how to manage risk. I presume, when you have this outstanding success ratio with your trading platform such as 96% more, just than you can use 5% (it is too much high risky).
Every Trader has his own risk management according to which he takes risk of his money and manage the trade so he can win maximum pips. Yes it is, we now the traders generally pick our trading egies based to our trading comprehension and we are aware of how much risk we can take when trading practically. In my trading career , I am not capable to manage my risk ratio during news due to absence of actual fundamental knowledge , that is why I constantly avoid news trading even though news trading is profitable.
I am new to forex. However, about 2 weeks ago began testing long term charts and utilizing 5%-7% risk free of sl or tp, this of course in demo account. And less then 2 months I am up 60 percent (this is principally due to no tp and quite good win ration).
I think its viable in long term if sl and tp is in place and win rate is kept high.
I will try it for couple months.
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