Maximum risk percentage | Psychology and Money Management


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Maximum risk percentage

  #8 (permalink)

North Carolina
 
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
 
Posts: 644 since Nov 2011

A good rule of thumb is to divide your max acceptable drawdown by 12. It is based on my experience testing systems in that most working systems typically won't have more then 12 losers in a row. And even if it did, you probably won't continue trading. If you take 30%/12 = 2.5%, 50%/12 = 4.1%, and 60%/12 = 5%.

You might look at fractional Kelly too. If you have a large enough account to use fractional kelly and adjust it, you are not likely to lose your account. However, you may prolong your drawdowns.

You mention you rarely take a full win, instead of risking more in contracts, you might be better off to buy an OTM spread when you think conditions are really conducive for a bigger win. This way you can take your profits as they come and still profit from more upside.


Last edited by tpredictor; August 10th, 2019 at 11:34 AM.
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