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I always base it on the difference between entry and the stop. I am
investigating adjusting this amount based on the chart pattern traded.
Some patterns, being less risky than others, should let me risk a larger
amount than those chart patterns that are more risky.
Mike Campbell wrote:
> For those of you who use stops (mental, hard, or otherwise) and have a
> percentage of capital that you are willing to risk on a trade, do you
> base the "risk" on the difference between your get-in value and your
> stop, or your get-in value alone?
>
> In other words, say you have $100000 capital, your get-in price is
> $100 and your initial stop is $90 and you're going to risk 2% on this
> trade ($2000). How many shares do you buy?
>
> 20? (Since $100 * 20 = 2000) or
> 200? (Since ($100 - $90) * 200 = 2000)
>
> I.e. do you base your risk on the fact that your stop may be hit or
> that the entire position may be lost?
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