Concerning risk per trade sizing - Psychology and Money Management | futures io social day trading
futures io futures trading


Concerning risk per trade sizing
Updated: Views / Replies:19,415 / 151
Created: by Big Mike Attachments:10

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 10  
 
Thread Tools Search this Thread
 

Concerning risk per trade sizing

  #51 (permalink)
Elite Member
Paris, France
 
Futures Experience: Advanced
Platform: Amibroker
Favorite Futures: Futures, Stocks
 
Posts: 96 since Jun 2011
Thanks: 118 given, 102 received

I see that everyone here has more or less the same kind of position sizing: fixed fractional 1 or 2%, increasing some trades or pyramiding winners.

Has anyone tried / tested / traded some other algorithms ?

- fixed ratio,
- depedancy of the previous trades,
- trading the equity curve,
- leverage space portfolio from Ralph Vince (this guy was claiming on a forum that he was at its 500th winner in a row !)

etc...

Just curious, interesting subject.

Reply With Quote
The following user says Thank You to TheTrend for this post:
 
  #52 (permalink)
Elite Member
Bala, PA, USA
 
Futures Experience: Intermediate
Platform: NinjaTrader
Broker/Data: Mirus, IB
Favorite Futures: SPY, Oil, Euro
 
monpere's Avatar
 
Posts: 1,858 since Jul 2010
Thanks: 300 given, 3,276 received


Big Mike View Post

I find it really helps to take a step back. Stop trying to scalp the market for ticks and load up some bigger charts. Switch to micro sized instruments if you need to, but get away from all the noise and focus on the bigger moves from day to day or week to week. Until you do this, things will likely only be confusing.

Once you are proficient at trading bigger charts profitability, then you can trade around those positions on smaller time frames.

Mike

The good thing about bigger charts, is that they generally give you cleaner, clearer signals. The bad thing is the bigger the time frame you trade the bigger your stops will generally have to be, and therefore the larger monetary risk you have to take. If your average stop size is 10 ticks on a 4 range chart, it will be 30 ticks on a 12 range chart. If you are trading futures, that is a hard pill to swallow, and most trader's accounts will not allow them to swallow that pill.

The 2nd thing that comes into play with bigger charts is relative risk/reward. Since your stops will generally be bigger, you will now require the market to move further to maintain the same risk/reward. Supposing you are trading a 4 range chart and putting your stop 1 tick behind your entry bar (stop is 5 ticks), you only need the market to move 10 ticks to get a 2:1 risk/reward. Now, if you are trading a 12 range chart (stop is now 13 ticks), the market has to move 26 ticks to maintain the identical 2:1 risk/reward. A 26 ticks move on the 4 range chart is a 5:1 risk/reward trade.

Larger chart timeframes also make great sense when you do use R-Multiple share sizing, because whether you are trading the 4 Range chart mentioned or the 12 range chart, your monetary risk will be the same. This works optimally when you trade stocks or Forex where the share sizing granularity is much greater then futures. With the more popular futures contracts, when your minimum dollar amount per tick increment is $10, this limits how well you can fine tune your dollar risk.

So, if you only want to risk $100 on any stock trade, on the 4 range chart, with the 5 tick stop you buy 2000 shares, on the 12 range chart with a 13 tick stop, you buy 800 shares. You are risking $100 on both trades, no matter which chart you trade. Only difference is, using the 2:1 risk/reward for example, with the first chart, 10 ticks will get you $200, with the 2nd chart, you have to wait for 26 ticks to make your $200.


Last edited by monpere; February 21st, 2012 at 07:22 PM.
Reply With Quote
The following 3 users say Thank You to monpere for this post:
 
  #53 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
 
Big Mike's Avatar
 
Posts: 46,240 since Jun 2009
Thanks: 29,356 given, 83,237 received



monpere View Post
The good thing about bigger charts, is that they generally give you cleaner, clearer signals. The bad thing is the bigger the time frame you trade the bigger your stops will generally have to be, and therefore the larger monetary risk you have to take.

This is not true.

People seem to be hung up on this bigger chart = bigger $$ stop. Not true.

Switch instruments people! Change markets! Trade the market and instrument that is appropriate for you. So if you want to trade a D1 time frame with a 200 tick target or stop, and such a stop is more than 1% of your account size, then guess what --- trade a different instrument or market.

I do not mean switch from ES to CL.

I mean switch from full sized futures EURUSD 6E, to the M6E on CME FX (1/10th size), or to spot forex micro EURUSD at 1/100th the size of the full 6E contract.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

Reply With Quote
The following 4 users say Thank You to Big Mike for this post:
 
  #54 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
 
Big Mike's Avatar
 
Posts: 46,240 since Jun 2009
Thanks: 29,356 given, 83,237 received


monpere View Post
The 2nd thing that comes into play with bigger charts is relative risk/reward. Since your stops will generally be bigger, you will now require the market to move further to maintain the same risk/reward. Supposing you are trading a 4 range chart and putting your stop 1 tick behind your entry bar (stop is 5 ticks), you only need the market to move 10 ticks to get a 2:1 risk/reward. Now, if you are trading a 12 range chart (stop is now 13 ticks), the market has to move 26 ticks to maintain the identical 2:1 risk/reward. A 26 ticks move on the 4 range chart is a 5:1 risk/reward trade.

In futures markets, 10 ticks = noise. Add to that the high cost of entry (commission, slippage, and not forgetting your time), and it makes no sense. I am glad you have made it work, but I cannot think of anyone else that is a retail trader that has succeeded at scalping for such tiny movements.

Majority of traders I know of try to use smaller and smaller charts, smaller stops, because they want to lessen the risk and $$ blow to their account. Then they end up with this ridiculously tiny stops and trade nothing but noise, ending up needing huge "trend" moves in order to make any money.

These guys would be far, far better served to increase their chart size 5x over, and trade a micro position (futures or forex) to maintain the $$ risk while trading above all the noise.

That said, there is middle ground. You don't have to go from a 4 range chart to a D1 chart, naturally. But 133 tick charts, 4 range charts, etc (I'm guilty of this in the past as well) are just crazy, and it is all tied to the perception of lowering risk, which is completely wrong.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

Reply With Quote
The following 4 users say Thank You to Big Mike for this post:
 
  #55 (permalink)
Elite Member
Bala, PA, USA
 
Futures Experience: Intermediate
Platform: NinjaTrader
Broker/Data: Mirus, IB
Favorite Futures: SPY, Oil, Euro
 
monpere's Avatar
 
Posts: 1,858 since Jul 2010
Thanks: 300 given, 3,276 received


Big Mike View Post
This is not true.

People seem to be hung up on this bigger chart = bigger $$ stop. Not true.

Switch instruments people! Change markets! Trade the market and instrument that is appropriate for you. So if you want to trade a D1 time frame with a 200 tick target or stop, and such a stop is more than 1% of your account size, then guess what --- trade a different instrument or market.

I do not mean switch from ES to CL.

I mean switch from full sized futures EURUSD 6E, to the M6E on CME FX (1/10th size), or to spot forex micro EURUSD at 1/100th the size of the full 6E contract.

Mike

Did you read my entire post? Given the example that I wrote (which is how I trade, and I assume that I'm probably not the only trader in the world that trades like that) how is that reasoning not true? And also further in my post, I also mention how different markets come into play, ie. trading stocks and Forex as opposed to futures.

I would agree if you said this 'is not always true', and if so, how about an example or so to illustrate that.
Also, I'm not sure where the standard 1%, 2% of trading account size came from. I trade full time and risk much less then 1% of my trading account on every trade. As an example, If you have a $50k trading account and you are trading the TF with a 5 tick stop, how much of your trading account are you risking per trade?


Last edited by monpere; February 21st, 2012 at 07:46 PM.
Reply With Quote
The following user says Thank You to monpere for this post:
 
  #56 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
 
Big Mike's Avatar
 
Posts: 46,240 since Jun 2009
Thanks: 29,356 given, 83,237 received


monpere View Post
Did you read my entire post? Given the example that I wrote (which is how I trade, and I assume that I'm probably not the only trader in the world that trades like that) how is that reasoning not true? And also further in my post, I also mention how different markets come into play, ie. trading stocks and Forex as opposed to futures.

I would agree if you said this 'is not always true', and if so, how about an example or so to illustrate that.
Also, I'm not sure where the standard 1%, 2% of trading account size came from. I trade full time and risk less then 0.1 % of my trading account on every trade.

You said "Bigger stops = bigger monetary risk". I am saying no, that is not at all what I am recommending. Bigger charts, bigger stops and SAME monetary (or less) risk by using a properly sized instrument or position.

I provided multiple examples in my last webinar "Where to start as a trader", part 1.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

Reply With Quote
The following 2 users say Thank You to Big Mike for this post:
 
  #57 (permalink)
Elite Member
Bala, PA, USA
 
Futures Experience: Intermediate
Platform: NinjaTrader
Broker/Data: Mirus, IB
Favorite Futures: SPY, Oil, Euro
 
monpere's Avatar
 
Posts: 1,858 since Jul 2010
Thanks: 300 given, 3,276 received


Big Mike View Post
You said "Bigger stops = bigger monetary risk". I am saying no, that is not at all what I am recommending. Bigger charts, bigger stops and SAME monetary (or less) risk by using a properly sized instrument or position.

I provided multiple examples in my last webinar "Where to start as a trader", part 1.

Mike

I understand you're a busy guy Mike, but read the entire post, we are partially saying the same thing. Read my paragraph on R-Multiples.

Reply With Quote
 
  #58 (permalink)
Elite Member
Quebec
 
Futures Experience: Intermediate
Platform: NinjaTrader wt Rancho Dinero's profiling tools
Broker/Data: Stage 5 trading/AMP/CQG
Favorite Futures: ES, NQ, YM
 
trendisyourfriend's Avatar
 
Posts: 3,698 since Oct 2009
Thanks: 3,042 given, 4,498 received

I hope perryg won't read that


Big Mike View Post
In futures markets, 10 ticks = noise. ...
That said, there is middle ground. You don't have to go from a 4 range chart to a D1 chart, naturally. But 133 tick charts, 4 range charts, etc (I'm guilty of this in the past as well) are just crazy, and it is all tied to the perception of lowering risk, which is completely wrong.

Mike


Reply With Quote
 
  #59 (permalink)
Elite Member
Bala, PA, USA
 
Futures Experience: Intermediate
Platform: NinjaTrader
Broker/Data: Mirus, IB
Favorite Futures: SPY, Oil, Euro
 
monpere's Avatar
 
Posts: 1,858 since Jul 2010
Thanks: 300 given, 3,276 received


Big Mike View Post
In futures markets, 10 ticks = noise. ...
That said, there is middle ground. You don't have to go from a 4 range chart to a D1 chart, naturally. But 133 tick charts, 4 range charts, etc (I'm guilty of this in the past as well) are just crazy, and it is all tied to the perception of lowering risk, which is completely wrong.

Mike.


trendisyourfriend View Post
I hope perryg won't read that


Don't you make me start posting my 4 Range charts up in here !!!

Reply With Quote
 
  #60 (permalink)
Elite Member
Prague, Czech Republic
 
Futures Experience: Advanced
Platform: AgenaTrader, Track'nTrade
Broker/Data: DeCarley/OEC, IBKR, IQFeed
Favorite Futures: futures, options
 
Posts: 180 since Sep 2010
Thanks: 66 given, 83 received



Big Mike View Post
This is not true.

People seem to be hung up on this bigger chart = bigger $$ stop. Not true.

Switch instruments people! Change markets! Trade the market and instrument that is appropriate for you. So if you want to trade a D1 time frame with a 200 tick target or stop, and such a stop is more than 1% of your account size, then guess what --- trade a different instrument or market.

Mike

Exactly, I've wrote the same couple of posts above. Mike is right on this one.

Reply With Quote

Reply



futures io > > > Concerning risk per trade sizing

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Jigsaw Trading: TBA

Elite only

FuturesTrader71: TBA

Elite only

NinjaTrader: TBA

Jan 18

RandBots: TBA

Jan 23

GFF Brokers & CME Group: Futures & Bitcoin

Elite only

Adam Grimes: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Weird chatbox re-sizing annoyance? forrestang Tech Support 4 November 2nd, 2011 08:52 PM
'Operation Twist,' 'Duration Risk' Dangers to Bond Trade Quick Summary News and Current Events 0 August 24th, 2011 04:50 PM
Position Sizing by Van Tharp Laserdan Psychology and Money Management 21 July 8th, 2011 11:37 AM
Position sizing codes ptcm EasyLanguage Programming 2 January 2nd, 2011 04:24 PM


All times are GMT -4. The time now is 03:23 AM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-18 in 0.15 seconds with 20 queries on phoenix via your IP 54.163.209.109