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Many textbooks advocate never risking more than around 2% of your equity on
any one trade. This means that with, say a $20K account in the futures
markets, you can only risk $400-$600 on one trade. Let's say you're
trading Bonds, then you can only buy 1 contract and risk roughly 16 ticks.
This is a very conservative way to trade.
This also means that you have $17K unused funds. To maximize the utility
of all the money invested with our broker, but still adhere to the 2% rule,
8-10 markets must be traded simultaneously. This obviously isn't practical
yet what the 2% rules implies. Some would call it overtrading.
How many of you feel that this rule is not practical? What techniques are
used to implement a more practical MM strategy yet avoid overtrading?
Thx,
Brian.
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