What risk per trade should it go with?
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Thread: What risk per trade should it go with?

  1. #1
    Hello. I've 1K live account.I have a profitable egy.

    Cease reduction: 50 pips.

    Take profit: 100 pips.

    Profit Factor: 5.5

    Currency pairs: GBPUSD and EURUSD

    2-3 transactions per day.

    Leverage: 1:100

    Trade length London and New York sessions.

    Thank you for advices.

  2. #2

  3. #3
    Quote Originally Posted by ;
    Kelly percent = W -- [(1 -- W) / R]

    Where:
    W = Winning likelihood
    R = Win/loss ratio
    The formula doesn't make much sense for me. If we have winning probability N = 0.5 and hence the win/loss ratio R. Kelly percent = 0.
    Or when we have W = 0.33 and R = 0.5, then Kelly percent = -0.33.
    What's the point?

  4. #4
    It's not difficult to calculate that in the event you need 20%/month and do 2-3 transactions every day (2.5 average) or 50 trades/month, then you have to make approximately ~0.4% average on each trade. Contemplating your profit variable is 5.5, you can risk 0.089% per commerce and you still will be earning 0.4% profit on average commerce.

  5. #5
    Just how much pips per month do you make with your egy?

    Should you make 400 pips - you can figure out the value of each pip.

    Balance - $ 1000 20% = $ 200 $ 200 = 400 pips 1 pip = $ 0.5

    So that the lot size for each transaction should be 0.05

    Am I right?

  6. #6
    A profit factor of 5.5 with 2:1 r/r ratio?!?

    How large is your sample of trades to compute this profit element?

  7. #7
    It is great that you have a profitable egy. That's a solid start. You would like to live to trade it today frequently over time. That means you wish to look at the downside more then the upside down. You might have a higher win rate however, you will have winners. It is inevitable. Additionally, you don't understand how many losers in a row which you might have. It might be 2,4, 6 or even 10.

    I will hear you today. He does not understand my egy. He does not understand how good I am. Perhaps but it does not matter. There's always a likelihood of X amount of declines in a row and you don't have any idea when that series of losses will happen. Thus, you protect against it.

    Risk 1% maximum. You use a predetermined SL of 50 pips. So 1%*Equity = 1%*1000 = $10. $10/50 =0.2/pip in order for the GU and EU pairs use 0.02 lots.

    I don't use fixed SL but instead past swing highs or swing lows but I'm simply using the situation you presented.

    If you understand your win rate and so losing rate then you can figure out the likelihood of X numbers of losers in a row and consequently your drawdown. It is always a fantastic practice to do.

    Additionally, just according to your own numbers and not knowing anything about the validity of your numbers (carrying them on pure trust), you don't need to risk more then 1% and you will grow nicely. It is a marathon not a sprint.

    However, you can ignore the above should you wish to shoot the moon.


    Quote Originally Posted by ;
    Hello. I have 1K live account.I have a profitable egy.

    Stop reduction: 50 pips.

    Take profit: 100 pips.

    Profit Factor: 5.5

    Currency pairs: GBPUSD and EURUSD

    2-3 transactions Daily.

    Leverage: 1:100

    Trade length London and New York sessions.

    Thanks for advices.

  8. #8
    Quote Originally Posted by ;
    A profit factor of 5.5 using 2:1 r/r ratio?!?

    How large was your sample of transactions to compute this profit factor?
    158 trades. The point Full stop loss is quite rare.

  9. #9
    Further to the above if you want to know the Likelihood of X number of Declines in a row and the Likelihood of a certain drawdown Subsequently use these equations:

    Prob X Declines in a row = (1-winrate)Power X
    which can also be stated as (LoseRate)Power X
    so at 70 Percent winrate therefore 30 Percent Lose Rate and you want to know Odds of 3 Winners at a row then:
    (1-.7)Power 3 = (0.3)Power 3 = (0.3)*(0.3)*(0.3)=2.7%

    Just How much drawdown at the number above...

    DD = 1-(1-risk%)Power X
    DD = 1-(1-.01)Electricity 3
    DD = 1 - [(.99)*(.99)*(.99)]
    DD = 1 - [.9703]
    DD = 2.97%

    So you have a 2.7% Likelihood of having 3 losses in a row That will lead to a 2.97% drawdown. This presumes 70 percent winrate and risk. Produce a spreadsheet and model your own risk, drawdown based on various risk profiles and determine what you are familiar with.

  10. #10
    Quote Originally Posted by ;
    A profit factor of 5.5 using 2:1 r/r ratio?!?

    How large is your sample of trades to compute this profit element?
    Thanks for replies and advice. Enjoy my pals.

    One I am aware that it's extremely stupid question - How not to trade with bigger lot size?

    Okay. I've 1k one my account. I will trade, theoretically, with 1 lot per trade. So my account will grow. This 1k is my own risk capital, I will shoot it up. So what you will say?

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