How do you calculate best optimal MM risk % per trade?

[eurgbp]

I've got 1000 USD and a strategy that makes sense and has a good profit factor.
But how do I calculate best optimal fixed fraction % for it?
Clearly if I risk 1% or 2% per each trade, I am not going anywhere and equity is not utilized at its fullest potential...
on the other hand if I trade let's say risking 90% of equity on each trade, I am playing with fire and about to blow up my account, right?
So how do you calculate best MM FF% ?
What do you use for educated guess then?

 

[Pharaoh]

Start small, 1 or 2% per trade and no more than 5-6% of your account at risk from all open trades at any time.

After you've proven your system in forward testing, you can consider slightly increasing your risk. You don't have to risk 90% to blow your account. Even if you've risked "only" 10% per trade, it only takes a few losses to inflict a large amount of damage on your account.

 

[arigoldman]

I agree with Pharaoh. It's important to have set rules that work most of the time and it's also important to know when to break those rules.

 

[WatanFX-Rep]

When I used to do MM, we had a in house term called ballooning.

It was basically the air or inflation of pips that were allowed in a given trade to run its course. All trades must be given some space for the draw down. Market makers aim at flushing out the stops all the time. There is a trick to setting the stop losses in a manner that lets those stop loss values be triggered without your own trade getting damaged.

This skill can only be learnt through experience.

Wish there was a black and white answer to this. There isn't one.

 

[downtrend]

I've got 1000 USD and a strategy that makes sense and has a good profit factor.
But how do I calculate best optimal fixed fraction % for it?
Clearly if I risk 1% or 2% per each trade, I am not going anywhere and equity is not utilized at its fullest potential...
on the other hand if I trade let's say risking 90% of equity on each trade, I am playing with fire and about to blow up my account, right?
So how do you calculate best MM FF% ?
What do you use for educated guess then?

The best method for this is to set a fix dollar amount that you are comfortable OK to lose on a particular trade. Then don't increase of decrease your risking amount, only change your lot size according to stop loss by adjusting that amount into it.

 

[Froso@FXNET]

Percentage of possibility the risk of loss not more than 5% is absolute necesssary , no matter want use 2% or 1% of risk management , but when use more than 5% i think such trader have greedy character in the minds , cause they think the more risk the more profit that will achieved. Its will dangerous

 

[John Mason]

The best method for this is to set a fix dollar amount that you are comfortable OK to lose on a particular trade. Then don't increase of decrease your risking amount, only change your lot size according to stop loss by adjusting that amount into it.

How much risks i am willing to take in a trade will also depend on the Trading capital that i am having with me.

With limited funds my trade value will remain small and so will be the gains

 

[bigdolly]

I've got 1000 USD and a strategy that makes sense and has a good profit factor.
But how do I calculate best optimal fixed fraction % for it?
Clearly if I risk 1% or 2% per each trade, I am not going anywhere and equity is not utilized at its fullest potential...
on the other hand if I trade let's say risking 90% of equity on each trade, I am playing with fire and about to blow up my account, right?
So how do you calculate best MM FF% ?
What do you use for educated guess then?

Anything more than 10% per trade I consider gambling. Instead of calculating percent view from another angle for example daily profit expectation. For example you want to make 20$ profit per day it means that you can make 2 trades with 1% risk exposure each, or 4 trades with 0.5% risk exposure. Bear in mind that you're charged commissions and spreads when making entry in the market, so it adds up to your losses or has a cut on your profit. In regard to 1000$ deposit I would start from 0.5% risk exposure, i.e. 5$ max loss.

 

[EuroTrader]

Anything more than 10% per trade I consider gambling. Instead of calculating percent view from another angle for example daily profit expectation. For example you want to make 20$ profit per day it means that you can make 2 trades with 1% risk exposure each, or 4 trades with 0.5% risk exposure. Bear in mind that you're charged commissions and spreads when making entry in the market, so it adds up to your losses or has a cut on your profit. In regard to 1000$ deposit I would start from 0.5% risk exposure, i.e. 5$ max loss.

The amount of income that we get from our trading in a day matters. If our income is not sufficient then we may not get success at all.

After all we may not be able to continue trading after getting repeated losses.

 

[david moore]

The first question to ask yourself before figuring out money management is the following: Do I have a true edge? If you are not sure, save your money. if you are sure you have an edge that will cove cost and slippage, then try to increase your initial capital.