I can't find any thread talking about position sizing, so I decided to start one to discuss.
After finding a profitable system, next step is to find the right position sizing system to maximize profit % over capital and do compounding.
Assuming my capital is $10000, I'm currently risking maximum $200/trade. Using the typical industry 2% risk per trade.
On average, my system gives me 8 trades per month.
My longest losing streak was $273, in 28 days, 6 trades. I'm using a dynamic system, I often move my stops, that's why when I lose, I rarely lose $200/trade eventhough I risk $200 initially.
2nd longest losing streak was $196, in 16 days, 5 trades.
With $10000 capital, what is the maximum risk per trade I should use to maximize my profits at the same time not risking too much to eventually blow up the account?
Here is how I think I should do it.
I assume 2 longest losing streak coming together. $273 + $196 = $469.
Even though it's not likely but it's still possible, so in order to make sure my account is almost impossible to blow up, I have decided to multiply $469 x 3 = $1407 as my capital, for risking $200/trade.
Now, if I have US$10,000 as capital, then I should risk $10000 x $200 / $1407 = $1421 per trade to maximize my profit % over capital. That's 14.2% max risk per trade.
And I will compound it using this 14.2% risk per trade when the account grows, until I experience a bigger losing streak, only then I will change my risk% again.
Please give me your feedback guys and girls.
Additional stats about my system.
Average loss per trade = -2.9%,
Average win per trade = 3.6%,
Winning ratio = 62%.
After finding a profitable system, next step is to find the right position sizing system to maximize profit % over capital and do compounding.
Assuming my capital is $10000, I'm currently risking maximum $200/trade. Using the typical industry 2% risk per trade.
On average, my system gives me 8 trades per month.
My longest losing streak was $273, in 28 days, 6 trades. I'm using a dynamic system, I often move my stops, that's why when I lose, I rarely lose $200/trade eventhough I risk $200 initially.
2nd longest losing streak was $196, in 16 days, 5 trades.
With $10000 capital, what is the maximum risk per trade I should use to maximize my profits at the same time not risking too much to eventually blow up the account?
Here is how I think I should do it.
I assume 2 longest losing streak coming together. $273 + $196 = $469.
Even though it's not likely but it's still possible, so in order to make sure my account is almost impossible to blow up, I have decided to multiply $469 x 3 = $1407 as my capital, for risking $200/trade.
Now, if I have US$10,000 as capital, then I should risk $10000 x $200 / $1407 = $1421 per trade to maximize my profit % over capital. That's 14.2% max risk per trade.
And I will compound it using this 14.2% risk per trade when the account grows, until I experience a bigger losing streak, only then I will change my risk% again.
Please give me your feedback guys and girls.
Additional stats about my system.
Average loss per trade = -2.9%,
Average win per trade = 3.6%,
Winning ratio = 62%.