About position sizing

[patrader]

Suppose my trade risk is 1% of capital for intraday. Now if there is some set up I am not very confident of, then is it ok to enter that set up with position sizing of 0.5% trade risk? I mean is it ok with respect to Money Management? Or is it a must that one needs to take all trades with same trade risk?

Regards
Patrader

 

[vijayanscbe]

Objective of the Risk management is to preserve the capital.
So if you take trade with 0.5% means your capital is double safe than 1% model.

 

[patrader]

Objective of the Risk management is to preserve the capital.
So if you take trade with 0.5% means your capital is double safe than 1% model.

very true, but was just confused that some trades will be with 1% trade risk and some with 0.5% trade risk. So what if most of the 0.5% ones hit target and most of 1% go for SL? ( And for this, the more confident set ups need to fail and less confident need to succeed , something that would ask us to reconsider our approach)
So I think R:R , win/loss ratio, active trade management for SL all will play a part. Thats why wanted to know if someone follows such approach.

 

[vijayanscbe]

very true, but was just confused that some trades will be with 1% trade risk and some with 0.5% trade risk. So what if most of the 0.5% ones hit target and most of 1% go for SL? ( And for this, the more confident set ups need to fail and less confident need to succeed , something that would ask us to reconsider our approach)
So I think R:R , win/loss ratio, active trade management for SL all will play a part. Thats why wanted to know if someone follows such approach.

I do and believe many traders, trades half the lot size when they are in doubt.

 

[howardroark]

The importance of position sizing is in the final expected result ...
Will you use ME and ME or ME and SE ...
This influences the position sizing ...

 

[mastermind007]

Objective of the Risk management is to preserve the capital.
So if you take trade with 0.5% means your capital is double safe than 1% model.

vijay, patrader.

Not quite true! 0.5% model only means that lesser of your capital is exposed to what you've perceived as higher risk.

Risk Management, albeit important, is only one aspect of trading. Objective of trading (gaining profit in a well planned manner) has higher precedence than the objective of risk management.

 

[mastermind007]

Suppose my trade risk is 1% of capital for intraday. Now if there is some set up I am not very confident of, then is it ok to enter that set up with position sizing of 0.5% trade risk? I mean is it ok with respect to Money Management? Or is it a must that one needs to take all trades with same trade risk?

Regards
Patrader

How did you arrive at number of 1% in first place? Is your aim to take 100 trades in a day?

 

[vijayanscbe]

vijay, patrader.

Not quite true! 0.5% model only means that lesser of your capital is exposed to what you've perceived as higher risk.

Risk Management, albeit important, is only one aspect of trading. Objective of trading (gaining profit in a well planned manner) has higher precedence than the objective of risk management.

I accept that we need a system/method with positive expectancy and edge in first place than RM.

RM is just another tool which has n number of possibilies to use.

I am speaking from my experience. I had followed a system which has 4 rules.
If all 4 rules satisfied I take long/short. But sometimes I feel skeptical even after all 4 rules satisfied, I dont know the reason. At that times I take trade with half the size than usual size, which gives some comfortable feeling. After some considerable amount trades , I analysed such situations and created a new rules/parameters.

And when I take contra trend trades for scalping , I do with half the size.

You cant say "Higher Risk" in such above instances.

Patrader is asking whether to reduce the risk to half or not, when a setup is skeptical . There is only two safe way , Skip the Trade or Reduce the size.