Maximum risk percentage | Psychology and Money Management - futures trading strategies, market news, trading charts and platforms

Psychology and Money Management

This forum is where successful traders spend most of their time and where struggling traders never visit. The psychology and money management forum is where you learn to become a profitable day trader


Maximum risk percentage

  #20 (permalink)

Trading Experience: Intermediate
Platform: thinkorswim
Broker/Data: TD
Favorite Futures: futures
lsubeano's Avatar
Posts: 213 since Jun 2010
Thanks: 65 given, 162 received

reno57540 View Post
I have been trading a method that is giving reasonable returns and I am currently considering increasing my position size.

I have about $65k in risk capital. Even if I lost all of it, it would not affect my life in a dramatic way financially.

However, I have been abiding to the 2% loss per day rule, and since I am trading CL with a maximum loss of $1k per contract, it means I am never trading more than 1 CL contract at a time.

The problem is that it will take me years to be able to increase my position substantially to really make a relevant living at this job.

For that reason I am seriously considering increasing my risk per day to 4%, and trade 1 CL contract per $25k equity instead of $50k.

Things to consider:

- My maximum stop is rarely hit, as I always tighten it very quickly via a trail system. Most of my losses are usually around $500-$750 per contract, so even with a 4% max risk, my losses will rarely be more than 2-3%.

- My target is the same as my max loss, $1K per contract, but for the same reason as I rarely take a full loss, I also seldom take a full win. In general my risk/reward is about 1/1. This also means that I rarely have a very long stretch of losers.

- I take no more than 1 trade per day (some days I don't even get an entry), so not only would this be my max loss per trade, but it would also be the max loss per day.

I would be interested to hear people's thoughts, thanks for reading.

take a days ie: $2 for simplicity

divide range by 1/2 = $1

goal is $1 per contract. if you make less than 1/2 ATR you're need to trade larger if underperforming

(too much???)----ok then 1/4 is goal. if you're 1/4 the ATR daily then add risk.

For 50k (and you don't care if you lose it) do 1 per 10k----but not all at once.

donno how you trade but add up is better. so say scalping/intra day swing going for 40-60c moves---

start with 1-2 contracts---if it goes against you beyond MAE cut it

if it goes in your favor---add on b/e test

...add on pullbacks or vwap tests

...add on breakouts and build a position

if the breakout reverses then cut add ons and reduce size

if you catch a good trend adding all day, reduce size at close and repeat next day.

don't like it? you can always position trade off daily/weekly-- risk 5%

if 2% of 50k is 1k
then up 2-3k risk and avg down for full size. if not in profit for day then close it...start over next day

do what works for you and stay comfortable in size....if 1 contract add makes you nervous then put in orders n stops and turn the computer off

Follow me on Twitter Reply With Quote
The following user says Thank You to lsubeano for this post: