How Do You Define Your Risk? - Trading-Lab

Leth · #1 03-29-2008, 03:19 AM

How do you define your risk? In this instance, how much do you bet/risk on each trade for optimal results when using your personal trading method or system?

For example, you might risk 1 to 5 percent depending on the number of tradeable securities you have in your portfolio (Fixed Fractional Betting). Your goal also might be to never have more than 40% of your entire wad in the market at any one time.

With this in mind, a couple examples might be:

A portfolio that includes 8 currency ETFs which risks 5% per trade = 40%
A portfolio that includes 20 diverisified stocks which risks 2% per trade = 40%

I personally use this method which is excellent since my system is based on positive expectancy; however, since no trader is exactly the same and there are a plethora of trading methods/systems, anyone care to share thiers?

Luvnrio · #2 04-04-2008, 03:01 PM

Almost a week now and no bites, wow tough crowd..

I'll give it a whirl. I set the amount I am willing to lose at or just below the previous days low. Plain and simple? More or less. I don't use a percentual factor at this time. When I hit the $10,000 mark, I will then rethink my risk/loss management. Right now it is set tight. XYZ goes my way or its the highway deal... I feel it is important to know that this is also based on XYZ hitting a specified entry point and that there was no major gap the day before. There are a few other rules i follow but prefer to keep them to myself at this time. You'll be able to read all about it, in my upcoming book, "Rookie Trader, Got any spare change?"

It's said, to trade like a machine (Sov) and I'm gonna add, be your own Disciple, discipline is the master key. Have a game plan and follow it, you will always come out victorious.

RiO

Soverus Khan · #3 04-04-2008, 10:44 PM

Scalps. "All in" each trade. Risk is next support or resistance in relation to the reward. For most trades this is $100-250 risk vs a target of $250-1000.

For swings: The risk to reward is calculated first, then #shares applied to determine risk $ amount. The probability of the trade has an impact on the final $ at risk.

I don't use percentages.

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#1 03-29-2008, 03:19 AM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	How Do You Define Your Risk? How do you define your risk? In this instance, how much do you bet/risk on each trade for optimal results when using your personal trading method or system? For example, you might risk 1 to 5 percent depending on the number of tradeable securities you have in your portfolio (Fixed Fractional Betting). Your goal also might be to never have more than 40% of your entire wad in the market at any one time. With this in mind, a couple examples might be: A portfolio that includes 8 currency ETFs which risks 5% per trade = 40% A portfolio that includes 20 diverisified stocks which risks 2% per trade = 40% I personally use this method which is excellent since my system is based on positive expectancy; however, since no trader is exactly the same and there are a plethora of trading methods/systems, anyone care to share thiers? __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School Last edited by Leth : 03-29-2008 at 03:34 AM.

#2 04-04-2008, 03:01 PM
Luvnrio Member Join Date: Dec 2007 Location: Rio de Janeiro Posts: 93	Almost a week now and no bites, wow tough crowd.. I'll give it a whirl. I set the amount I am willing to lose at or just below the previous days low. Plain and simple? More or less. I don't use a percentual factor at this time. When I hit the $10,000 mark, I will then rethink my risk/loss management. Right now it is set tight. XYZ goes my way or its the highway deal... I feel it is important to know that this is also based on XYZ hitting a specified entry point and that there was no major gap the day before. There are a few other rules i follow but prefer to keep them to myself at this time. You'll be able to read all about it, in my upcoming book, "Rookie Trader, Got any spare change?" It's said, to trade like a machine (Sov) and I'm gonna add, be your own Disciple, discipline is the master key. Have a game plan and follow it, you will always come out victorious. RiO __________________ "Lead, follow, or get out of the way." Thomas Paine "Insanity is doing the same thing over and over again and expecting different results." Albert Einstein

#3 04-04-2008, 10:44 PM
Soverus Khan Senior Member Join Date: Dec 2007 Posts: 306	Scalps. "All in" each trade. Risk is next support or resistance in relation to the reward. For most trades this is $100-250 risk vs a target of $250-1000. For swings: The risk to reward is calculated first, then #shares applied to determine risk $ amount. The probability of the trade has an impact on the final $ at risk. I don't use percentages.