[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

Re: Risk of ruin, amount per trade formula?



PureBytes Links

Trading Reference Links

Guy;

I definitely don't get it: if you risk 33 % of your capital on each trade, if 
you have three losers in a row you are dead. 3% is not a number that has been 
picked up randomly . If you test a system with 3, 4 or 5% you will get 
differrent drawdowns (with 33% you are going to have a drawdown of 100% very 
quickly) and you will choose the one you feel confortable with knowing that 
the worst is always to come. You drawdonw will bve a fonction of you edge per 
trade but also of the frequency of you trade. A 5% risk may , in some cases 
be acceptable if you trade unfrequently.
We are very far from the initial margin.

Jean Jacques