Trader Mike post on 100R
Trader Mike has a nice, thorough post about the results of his day trading for the last year or so. I found it very interesting to compare to my own stats since I started day trading at the end of January.
Trading for a prop firm is different as I have more leverage (currently 10x compared to 4x) but I pay 10% of the profits to the firm. Plus I get cheaper commissions and someone who seems to be able to help account issues or problems resolve more quickly. If I had a lot of money, I probably wouldn't use a prop firm, although there are some advantages. I think trading with a prop firm is a good idea for someone who doesn't have a lot of money, but wants to try trading for a living.
I currently risk 1% of my account per trade (1R = 1%), but I am thinking of moving this up closer to 2%. I am up about 34R since I started trading at the end of January. The biggest drawdown per month has been 4R or 4%. 34% is okay, but not enough. With my side programming job I have enough - but I would like to only trade for a living. Risking only 1% per 1R leaves a lot of wasted leverage which is the whole point of why I quit my job to trade in the first place.
I figure that even a 10% drawdown per month is okay as long as I remain consistently profitable. Any drawdown (less than 100%) is okay as long as I remain consistently profitable. And the more I put to risk, the more I can make.
The goal is to have a system that is consistently profitable and the highest risk level that will not allow you to go bust in a worst case scenario. Risk is a tricky thing to adjust because I DO NOT want to go bust. Starting in May I plan to slightly increase my risk to see the effect it has on my trading and profits.
Even though I don't ever pull my stops, my biggest problem is over-trading. My new "three strikes and you're out" policy has been working so far to stop me from getting carried away.
Comments
i didnt know you traded with a prop firm, 10X is alot...for instance if you have $10,000 your able to use up to $100,000, but you say you only risk 1% of your account which would equal to only $1000 per trade. Am i reading this right?
Congrats on the success so far. That 10x leverage *can* be nice but it can also cut both ways. It seems to me that one would have to either be using a huge R value, super tight stops and/or in a ton of trades at once in order to use most or all of that buying power. Do you know the most BP you've ever used? 5x, 6x?
Also, you confused me a bit. You said that "even a 10% drawdown per month is okay as long as I remain consistently profitable." Isn't that a contradiction? How can you have drawdowns and also be 'consistently' profitable?
2% risk seems very aggressive to me. (But if you are gonna increase it, it's very wise to do it incrementally as you suggest.) Since you have another source of income I'd recommend staying at 1% and just building your account up. At the rate you're going you should be able to build up your equity pretty quick.
Eyal - I'll look into how many trades I made and get back to you - it is probably pretty high, so commissions may eat into the 2R I got on you.
Bob - in your example a 1% risk would be $100 per trade.
Mike - Yeah, the most BP I've used so far is probably around 6x. The drawdown per month is the lowest that my account gets during a month, but I have so far ended every month with a profit. I may be using these terms wrong. The compounding idea is a good one to think about instead of/in combination with raising risk. Thanks for the ideas.
thanks for the response....
you said you risk 1% of your account, is the amount before your buying power or after. Assume i have $50,000 of my money in the account with 10X which is equal to $500,000. Which 1% are you risking, $50,000 or $500,000...
and
What if you buy XYZ and it starts trading down and nears -0.5% of your account, when do you decide to cut your losses to move to another daytrade.
learning how to daytrade, only swingtrade now. Thats why i have these questions...Trying to grasp as much as i can before doing it. thanks
You beat me by 2R's on profit and by 1R on drawdown :) Can you tell us how many trades in total you took?