That would depend on your reasoning. If you were going to lower your percent risk because you were retiring and you are 80 years old then cool. But if you are lowering your percent risk simply because your balance is up then no. If you are not willing to risk a given percentage when your net worth is 250,000, why would you risk that percentage when your net worth is just 10,000?
Ed Seykota said that people should risk only 10% of their net worth and risk only 1% of that at risk amount on any one trade. That means they are risking just 1% of 10% of their net worth on any given trade. Or in other words, they are to risk no more than 10 basis points of their total net worth on a given trade and limit their drawdown to 10% of their net worth.
The percentage you should risk on a given trade has more to do with your total outstanding risk and the expectancy of your system than your net worth.
To be frank i was not calculating the risk percentage all these days and that is the reason i have lost some huge amount of money to the forex market because of which i would like to abstain from this method and be more involved in the proper risk calculation henceforth.
The last post which Acid shared says it all. Well the end part of it. People should risks a % of their account based on the system which they are using. So many people focus simply on what they are risking, instead of what is making decide to take the risk in the first place. The sad reality is you can risk .01% of your account per trade,but if you system at best is a coin toss, then the reality is not only will bleed your account to death slowly, but you will simply be losing your time. Time, something we can never get back.
His statement has made me realize regarding the risk exposure and perception of the same by the trader. The entire concept revolves around the traders risk caliber and trading skills developed by the trader.
Which of course leads to something which I speak about a lot with fellow traders. If your money management, risk management, and trade management are important, each one should be constructed based on the system which is being used. Being that everyone seems to have different opinions about what the market will do next, it is unfair to limit anyone to say any specific % of their account they should or shouldnât use, as the actual system isnât actually being discussed.
Any regulars care to share what their stance is on position sizing. Iâve been reading a Van Tharp book, where at least one trader stated that positioning sizing was the most crucial aspect of his trading that turned him from ordinary to⌠not ordinary. He mentions a position sizing strategy, which he doesnât go into detail on, but I understand the rationale.
But Iâm wondering how you all approach position sizing as it relates to your strategy, because I imagine it CANâT be as simple as 1% or 2% of your account on any one trade or set of trades. What if you find multiple opportunities to trade at the same time? When do you have enough at risk at one time? Do you call it quits for the day or the week once you hit your threshold of losses, and then come back the following period? Maybe itâs a set number of losing trades?
@_bob mentions that he doesnât rely much on % risk or R:R ratio (link).
@Tygma says > I ask myself in the morning how much am I willing to loose today before I walk awayâŚand that usually ends up on 5% of my total accounts.
@galaxytrades > I would see how often I trade and adjust my rsk % from there. I risk 1% per trade but I trade around 5 trades a day. I also have a strike 3 rule where if I lose money 3 times in a row, I stop trading for the day
quick_pipslip risks 2% of his account if itâs within 1% of equity high.
So several different approaches. What works for you?
I risk 3%, and would even go up to 5% if the setup is on the monthly or Weekly and super HQ.
Risking 1% or 2% is for day trading since youâd need to open a lot of positions to make some money by only risking 1 every time.
First of all position size has nothing to do with the amount you are ready to risk, that is your risk percentage. Entry levels are important for position size, and also your stop loss levels. Whenever I am trading any security, forex, stocks, indices, be it on forex.com, robinhood, turnkeyforex, I always divide the risk value by the stop loss distance. This gives me a clear position size for my trade.
If you think that forex trading is going to be easy, you will have to rethink because thatâs not how the truth looks. There is a requirement of hard work every time you go live. You will have to build strategies that are capable of helping you stay in the market and make profits.
I believe itâs quite subjective to be honest. I agree 2% is a rule of the thumb but then letâs not forget that your dollar limit is always determined by your account size alongside the percentage you opt for. Let this limit be your guideline for every trade initially. I would suggest you to go for 1% of your accountâs value which means that youâll be risking only 1% or less. Now there are chances that other trade variables change but make sure that your account risk is constant. I know many traders who vary like 3% in one, 1% in another and then 5% in the third one. Simply choose your Dollar amount or percentage and stick to it till the time it exceeds the 1% limit. Keep trying different trading styles and techniques while redefining your strategy to protect the downside and maximize the upside.