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> To trade on your own ( real traders), how much risk capital is prudent?
How
> little can you start with?
Depends on what you're trading, ie, the trading range and how you trade it.
It's more a question of how much to risk on each trade. If you say 2% risk
and you're trading the S&P eMini where 8 points will avoid being stopped by
noise on most days, then you need $20,000. How little can you start with?
Depends on whether you want to have a chance of winning or not. For the
eMini, you could start with $3938 although you'd only have 15 points to give
before you got a margin call and you'd have to win the first trade in order
to continue without injecting new capital. I think that the minimum amount
and the prudent amount should be the same if you want to have a chance of
winning. Unleveraged trading eliminates the problems of margin but
everything else remains the same.
It's important to keep the individual trade risk down because of the
liklihood of a string of losses and what's needed to return to the
pre-string account level. Risking 5% means that you're probably history if
your have 6 losses in a row early in your trading because you won't be able
to return 42%. Risking 2% means that you have an excellent chance of
recovering if you have 6 losses in a row. Don't be mislead by your system
testing. If your testing says that the maximum number of losses in a row is
five, that's true only for that set of data. Assume your worst number of
losses is somewhere in the future and assume it's the near future. Testing
and trading have one huge difference: when you trade, Murphy is your silent
trading partner.
15000
5% 750 14250 -5.00% 5.26%
750 13500 -10.00% 11.11%
750 12750 -15.00% 17.65%
750 12000 -20.00% 25.00%
750 11250 -25.00% 33.33%
750 10500 -30.00% 42.86%
15000
2% 300 14700 -2.00% 2.04%
300 14400 -4.00% 4.17%
300 14100 -6.00% 6.38%
300 13800 -8.00% 8.70%
300 13500 -10.00% 11.11%
300 13200 -12.00% 13.64%
Regards,
Mike
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