For the time being, as I get back into trading, and until I make more consistent profits, I will set max risks of 5% of my account's highest recent cash value per trade (position size does not decrease every loss). That means I will have 20 shots before being completely depleted. Although really it's more like 5 shots before a lock down is triggered, because that will be 75% of value.
This is aggressive enough to suit my tastes. 10% max loss per trade is just too much. Each one of those is too much of a knockout. Of course the plan is to NOT take the max loss. To take losses discretionarily...however you spell that. Much less than max loss usually.
Also, if having a particularly bad time or in a fragile state, acceptable max losses can be halved or even quartered as ICT suggests, to allow trading to continue. Max loss is just that, MAXXXXXX loss! Not to be exceeded!
Max Loss: 5% of overall portfolio--automatic measures must always be in place to ensure loss does not exceed the Max Loss.
--With options strategies, the trade cost will be the max loss. The possible exception for options is straddle earnings plays. These straddles will be liquidated before expiration, there will be some value left although they can lose a very significant amount if the stock doesn't move. Paper trading will be required to get an accurate feel for how to determine position sizing with these instruments. As a note, betting heavily on one straddle play is really asking for trouble. These are very "hit and miss". So position size should remain quite limited.
--For forex time-based trading that is high probability the loss will be limited to 1% if trading tightly because there of the way I trade it is very difficult to get out early. If trading along ICT guidelines, with 1/3rd of day's range stop, then 2% is acceptable, since those are much higher probability trades.
--For computerized forex time-based trades, max loss will be 1%. These are far less likely to be successful or to experience an extended string of losses, tolerances must be adjusted accordingly.
--Tight futures trades will be treated the same as forex, 1% max loss (of the entire portfolio) will be tolerated. Only after data shows we can make money consistently though, subject to adjustment.
--With large commitments of capital (such as trades on XIV) and where margin is used the principle will be the exact same. First: a position with a 5% max loss will be taken. Then if the market deteriorates further, it will be liquidated. If instead the market proceeds higher, a second position will be taken. The stop will be moved up for a combined loss of 5%, this will be done with successive entries such that the entire amount is committed in 3- 4 installments, with margin going in last, after which an appropriate trailing stop will be used to take the margin off the table if things start deteriorating. A medium term position: small dips will be played with margin. When it looks sour, margin will be taken off. If it looks good, margin will be put on. If things really start going south though, like when futures go into backwardation, the entire position will be liquidated, perhaps in several chunks to get better pricing, although margin will always be liquidated straight away at the first signs of trouble.
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