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Maximum risk percentage
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Maximum risk percentage

  #11 (permalink)
Potomac, MD
 
Trading Experience: Intermediate
Platform: ToS, NT
Broker/Data: TD Ameritrade, IB
Favorite Futures: QM/CL
 
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mattz View Post
Traders ask me the same question that you posted a lot, and my answer is always focused on their psychology. Can they handle the more significant drawdowns?

I find that any transition you do has to be somewhat gradual, so in your case, where you have enough risk capital, open an additional account and trade $25K per one contract. Trade that for six months, and that experience would be more insightful than any advice given. You conquered a winning method, and that is an achievement. Please don't rush to become another statistic because it's better to keep the pace that you are on and win than rush and....you know the rest. You have been there before.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Using my method, trading 1CL per $25k equates to a 4% max loss per trade, which is what I am considering doing. I currently trade 1CL per $50k.

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  #12 (permalink)
Market Wizard
Boca Raton
 
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reno57540 View Post
Using my method, trading 1CL per $25k equates to a 4% max loss per trade, which is what I am considering doing. I currently trade 1CL per $50k.

On the surface, makes sense and reasonable. Update as you go how it affects your trading.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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  #13 (permalink)
Potomac, MD
 
Trading Experience: Intermediate
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Favorite Futures: QM/CL
 
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Leon of Pizza View Post
Agreed. So, perhaps look at the QM product? Its in between a mini and a micro. Its liquid, but he will give up a tick or two from time to time. He's trading for 100t targets, so its a light headwind. The math will be unfriendly with its 2.5 cent tick increment. But a 2 lot QM will be a half step transition, compared to the 2 lot CL.

Or, go with the 4% and set a floor at some comfortable number. If the floor is reached, he can reassess.

Yes I am definitely considering QM as well. QM is exactly 1/2 CL, so 3QM would be a good step between 1 CL and 2 CL.

But as you mentioned below it doesn't move as smoothly, which arguably isn't a big deal when you trade with a $1 Stop/Target.

I am still brainstorming on the options, and hope to come up with a decision early this week.

Thanks everyone for sharing your thoughts and opinions.

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  #14 (permalink)
Legendary Market Wizard
Cincinnati Ohio
 
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General question: Should the amount of risk per trade factor in the type of trading you are doing? For example day trading vs swing trading.

If your a day trader and make 3 to 5 trades a day, wouldn’t you want your % risk to be lower?

If your swing trading where your making 1 trade a week, then the % risk could be higher?

Robert

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  #15 (permalink)
North Carolina
 
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
 
Posts: 644 since Nov 2011

@silverDragon

Actually, the risk is less important then having a working method. But, yes you are absolutely correct that a daily loss limit from 2% to 7% makes sense for a day trader. One good reason for the total risk limit is to limit the damage caused by serial correlation of losers which is probably the #1 account killer. Because of day structure, serial correlation of both winner and loser is, I suspect, more likely for day trading.

There are several factors actually that are important. The probability of taking a loss and probability of correlated losses are probably the most important factors. Psychology is relevant too which is why with quantitative systems it is possible to risk more. So, if you're trading an options spread with a larger risk but a statistically low probability of taking that loss-- that's a tail risk.

The account size is relevant too. If you're trading a 10k account with a $600 daily loss limit, you are at 6% risk per day. On the other hand, a 100k account with a 3% risk limit would be 3k. Assuming a 30% return on risk objective per day, you are at $180/day on the smaller account and $900 per day on the larger amount. If you have an income objective, for example, of $500 per day there is no reason to risk 3% on the larger account as only ~$1600 should be needed.

There is also the risk of your method to quit working. So, this is why it doesn't make sense to compare trading to investing.


Silver Dragon View Post
General question: Should the amount of risk per trade factor in the type of trading you are doing? For example day trading vs swing trading.

If your a day trader and make 3 to 5 trades a day, wouldn’t you want your % risk to be lower?

If your swing trading where your making 1 trade a week, then the % risk could be higher?

Robert


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  #16 (permalink)
St. Louis
 
Trading Experience: Beginner
Platform: thinkorswim, NT8
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reno57540 View Post
...hope to come up with a decision early this week.

I'd like to know how it works out. Also, I'm curious about something: did you first set your risk limit and then design your trades around that number? I'm not saying its wrong, just that it looks coincidental and the size of your stake is probably random.

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  #17 (permalink)
Potomac, MD
 
Trading Experience: Intermediate
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Broker/Data: TD Ameritrade, IB
Favorite Futures: QM/CL
 
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Leon of Pizza View Post
I'd like to know how it works out. Also, I'm curious about something: did you first set your risk limit and then design your trades around that number? I'm not saying its wrong, just that it looks coincidental and the size of your stake is probably random.



The $1 stop came from market observations . I realized that more often than not I would get to my profit target before a trailing stop of $1 was hit. The method is only marginally profitable and that is why increasing the position is necessary to make real $$$.

I have actually done a lot back testing this week and realized that a $0.75 is almost as effective as the $1 trail. So my plan at this point is to increase my position to 2 cl contracts and use a $0.75 trail stop, that would trail closer and closer as the market goes in the right direction. With 2 contracts and a $0.75 trail stop I am barely above a 2% max loss per trade.


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  #18 (permalink)
St. Louis
 
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reno57540 View Post
The method is only marginally profitable...

As far as I can see, all edges are thin. Then the next step is to cull methods for consistency and ease of execution.

Your idea to modify the trade sounds best. It avoids using the silly QM tick increment (who suggested that?), and its now closer to my pain threshold of $250.

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  #19 (permalink)
Lisbon, Portugal
 
 
Posts: 34 since Jun 2017
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adjust risk

Hi

I did not go through all the previous posts. But have you already considered to adjust your method in order to take on less risk? What if you could be more precise with your entries si it would allow you to set your stop at say 5-8 Ticks?

Cheers and best,
Wernersabel

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