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Thread: 5% risk per trade?

  1. #21
    Quote Originally Posted by ;
    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.

  2. #22
    Quote Originally Posted by ;
    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.

  3. #23
    Quote Originally Posted by ;
    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

  4. #24
    Quote Originally Posted by ;
    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.

  5. #25
    Quote Originally Posted by ;
    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

  6. #26
    Quote Originally Posted by ;
    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.



    From here: http://www.newtraderu.com/2015/04/08...ng-principles/ or herehttp://www.newtraderu.com/2015/02/17...ta-every-said/

  7. #27
    Quote Originally Posted by ;
    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.
    Quote Originally Posted by ;
    Your assumptions are your windows on the world.
    Risk/portfolio mathematics is an specific science. It leaves no room for assumptions.

  8. #28
    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.

  9. #29
    '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.

  10. #30
    'Ed Seykota is thought to use 5 percent per commerce...'

    Is said? Where did you get that from?

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