I'm trading with 50% of my total capital at the moment. Am I making a mistake?

I feel like it’s easier to keep a big account profitable to make up for the cost of spreads. This way I also get to invest in multiple currency pairs and diversify the risk. My profits are steady but it’s not like I don’t have bad days. Just need some reassurance that I’m not going down a wrong path.

Read up about positive expectancy.

You are going down the wrong path, which will soon lead to blowing your account, however much capital you have. I once suffered 13 consecutive losses on one day, even though my risk was spread over different pairs, both buying and selling. Fortunately, I was only risking 0.5.% a trade. Lesson learnt.

Set a maximum risk per day (say) at 5%, not 50% - which is gamblling, not trading - and if you follow that come hell or high water, you will still be in the game.

Without capital you cannot trade.

5 Likes

I’m assuming you mean you are using 50% of your net capital to trade with and the other 50% is in cash or other assets?
OR
Do you mean you’re risking 50% of your trading account on each individual trade?

Either one I would say is yes, a mistake. One significantly more than the other but both are high risk meaning your chance of long term success is low.

Depends what your end game is… Do you want to be sustainably trading for income 10 years down the track? OR do you want to double your account in a couple of weeks to show your friends on Instagram at the risk of loosing your entire account.

Don’t mean to come across harsh but I also don’t want you to become another statistic due to risking too much.

3 Likes

My problem is that I don’t want to play too safe.

You’re right with your first assumption :slight_smile:
I’m not really in for a long haul, do want to make some quick bucks for MYSELF and then who knows, what happens next!

Then trade options.

1 Like

Risking 50% of your capital is totally unsafe. If you toss a coin 100 times the heads/tails outcome will be around 50 -50 - Agreed?

Well try it out and you will see there will be long consecutive lines of heads and tails - last time was 9 heads and 11 tails.

You only have to run into a few consecutive losing trades - and BANG - there goes your account. if you lose 50% of $200 that’s $100. To get back to $200 you have to risk 50% twice.

Anyway, you’ll learn…

2 Likes

I feel they are more complicated.

Exactly- that is by design to keep people like you and me out of the market. Once you lift the curtain, it’s as easy as riding a bike. Big words and math try to make it seem like a mountain, when it’s really just a small hill. Takes a lot up front, but once you get it you’ll never look back.

There is no other market where you can define your risk such as in the options space.

1 Like

I believe the “timing” getting it right, is really difficult in options trading.
I wouldn’t know though, haven’t ventured that side.

Not sure what you mean by “timing”?
Yea- we always fear what we don’t know. :slight_smile:

Do you know what is more difficult than trading options? Trying to predict which direction price will move next.

The strategies I deploy are 100% directionless- with the only factor that matters being implied volatility (basically, option pricing). It is objective and probability based- and, less risky. No other market on the planet offers that.

1 Like

What do you mean with 50% of my total capital?

Hi,
Do you have any recommendations for a good read (book) or website / blog / course - perhaps like School of Pipsology, that one could follow to understand options? Whilst I am at it relearning Forex, I feel a need to review whether options may suit my purpose better. This specifically relates to our current Crypto portfolio which became an awful lot bigger than intended over a short space of time, and now I have to pay serious attention to our future approach, strategy and plans for continued participation knowing the elephant in the room could be a repeat of the 2017 market crash. Looking for mitigation strategies for long term participation but covering the downside.

Yea, head out to YouTube and look up tastytrade. They have enough free content for (a) a lifetime (b) to teach yourself how to become a professional options trader- including their own brokerage (tastyworks). The CEO is Tom Sosnoff- who created the ThinkorSwim platform on TDA. Everything they do is free, and, you can even email them- Tom responds to every single email.

Credibility, authenticity, and a genuine inspiration to help others. Literally the opposite of 98.5% of “pros” you’ll find in the FX space. The foundation of everything they do (mind you, Tom and Tony are legit former Chicago floor traders) is selling premium in high IV environments.

Mitigation is simple. If you have a bias, it’s incredibly easy to efficiently express that in the derivatives space. If you beta-weight your books’ deltas to SPY, you can easily move in/out of SPY options to hedge off risk. This depends on what your trading account size is-- it gets a bit more difficult above 150/200k. But anything under that, you can be as delta neutral as you want. Whether or not that’s a profitable long term strategy you’ll just have to wait and see.

Facts, I’ve blown 4 accounts riding the high of a win streak that came crashing down in one day because I said the hell with proper risk management :man_facepalming:t5:

1 Like

I know right :woozy_face:
Dreaming about and imagining those huge wins can be so enticing

1 Like

Thanks for the heads up. I found a vid introducing options with tastytrade intro search string. I have saved that as a favourite and will return to it at the right juncture in the training plan. Really appreciated. :star_struck:

Good luck. You seem like a smart guy and when you see how they trade you’ll never look at trading the same way. Finding Tom was the single most important step for me in taking the leap from novice to a whole different level on it’s own scale. Nothing out there compares. Stick with it, because the initial learning curve is very steep. Once you crest that though, it’s like opening up a 3rd eye to the markets and looking behind the scenes. Eventually, you’ll want to get a demo account on either tastyworks or TDA ToS- to start building your own positions and really cementing in their methods.

After that, you can start with literally $500-$1000 and put on 100% risk-defined trades to wet your beak. After that, the sky is the limit.

Also, supplement all of that with Options Alpha material on youtube.

Jake

Months or years of hard work can quickly come crashing down when you begin to think you are smarter than the markets and get greedy. Happens to most.