[B]Student’s Question:[/B]
This might seem like a silly question… but please can you help me better understand the table extract attached (it is taken from from the above webinar) by providing me with the rational/formulas used?
[B]Power Course Instructor’s Response:[/B]
Sure…
Let’s say that you have a $1000 account and 25% of it, $250, is lost and you now have $750 in the account. $250 is 33% of $750. So the percent that you have to recoup, 33%, is actually greater than the percent that was lost, 25%.
Looking at the numbers in the grid, it becomes quite apparent why one should not risk large percentages of their account at one time. The recommended amount to risk at one time (not per trade but at one time) is no more than 5% of the account balance.