Maximum risk percentage
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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
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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

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  #13 (permalink)
Potomac, MD
 
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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)
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
 
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@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)
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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
 
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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)
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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: 35 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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  #20 (permalink)
hollywood
 
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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 ATR....so 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 underperforming....no 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

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