% of Capital per trade ?


heres a question from an old friend on Forex Factory

concerning % allocations of capital to each trade you make

How many pips represent 1%? of Capital base ?

Hi D - hope you are well ...

1% represents a traders capital base and is generally perceived to be a reasonable amount for a trade

so if you had say $10,000 you were using to trade then 1% would be $100 per trade

you then devide the stop loss pips into $100 to get the $ / Pip you trade

as an example when i am scalping i generally am using 1% of a theoretical capital base .....and my stiop loss is max 5-7 pips mainly .....depends on the circumstances

so yesterday i was a little down on 1% per trade as cable was pretty volatile ........lets say 0.75% per trade

and say 5 pips per scalp = 0.15% of my capital base per pip ...

so if you stayed at this pretty conservative level you would need to make 100 / 0.15 = 667 pips to return 100% on capital base (allowing for spreads perhaps a little more)

on 1% (more my style) its 100 / 0.20 = 500 pips .......and i use this a lot to benchmark my trading

I should be able to consistently make say 20-30 pips on half decent sessions*** .....sometimes more , sometimes less .....so theoretically i should be able to deliver 100% return on capital every 15-20 sessions ...........all on average here .....not guaranteed

so if i traded most days in a month and it was a decent month i should be getting around 100% a month .....but again i rarely trade every session in a month

yesterday there were literally hundreds of pips on offer and that can speed up the process !

N

*** note that i will try to take this pippage out of the market in the London session ....if i cant do it during london i will trade the US opens if timing allows .......or I just trade anyway as i enjoy trading ........theres no rules ....trade as much or as little as you like .....a lot of traders say walk away after say 3 consecutively losing trades ......but if you are happy and executing everything correctly why would you drop trades out of your sample size ?......the idea here is that a winning system needs to be executed consistently ....if you stop trading wheres the consistency in that ?...the amount of traders i now that perhaps have a poor period then immediately have a superb run ......you have to be in it to win it


4 views0 comments

Recent Posts

See All