Good math for a 1:1 success/failure, risk/reward ratio, and were you lock the risk amount to the original account balance instead of current balance. What can kill people is that some of them can decide that the new system they've created or purchased is going to be right 90% of the time with a 1:1 risk/reward ratio or better. Some systems can achieve this for short times, but I've never heard of one that could sustain it.
Quote:
Originally Posted by bygolly
Limit your risk (this was attributed to a posting by the Elliott Wave group, however, I was not able to confirm)
If you risk 50% – you will wipe out as soon as you have 2 consecutive losing trades – 1 chance in 4
If you risk 25% – you will wipe out as soon as you have 4 consecutive losing trades – 1 chance in 16
If you risk 10% – you will wipe out as soon as you have 10 consecutive losing trades – 1 chance in 1024
If you risk 5% – you will wipe out as soon as you have 20 consecutive losing trades – 1 chance in 1,048,576 (about a million)
If you risk 2% – you will wipe out as soon as you have 50 consecutive losing trades – 1 chance in 1,125,899,906,842,620 or about a BILLION!
Somewhere between 2-5% is the maximum amount you can risk
The average bank trader or hedge fund only risks 1% to 1 ½ % of the account.
If you can’t be successful trading a micro account, don’t go up to a mini account. Don’t go up to a standard account if you can’t make a micro or mini account work.
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