which is better risk a fixed % or amount of money? - page 2

[Josip Vukelja]

anurag bhargava:

what about if u have less capital,for eg : suppose a capital of 500$ or may be 250$.

then what r the suggestions. 

My humble suggestion is that you remain the same concept as if you have $50 000.

 Objective expectancy is what you need in case you are trading $500. No way you can make a living trading $500, there is simply no logic in that.

Even if you manage to make a great profit, let's say $5000, in a short time, sooner or later you will loose it all because it is not feasible to remain that pace.

 

Better said, if you start with $250, that is absolute fine, think of it as a great opportunity to learn and as preparation for a great things/career.

You must force yourself to trade on every trade as if you trade $250 000. Focus on process of trading and tune up your strategy, bring it almost to perfection.

Sooner you understand that trading is a business and not easy money, you have a better chance to achive a great things trading.

 

You must stop trading money (your PnL) and start trading charts (or sitting on your hands if there is nothing to trade). Not a single trader succeeded (and never will) who was focused on making money instead of trading strategy, with all rules in place, on every placed trade. 

[Keith Watford]

Josip Vukelja:

Hi, from a mathematical point of view % based trading is better. Let's assume you have $1000 and risking 10% per trade ($100 on the first trade). 

If you have a winning streak 10 trades: your account will grow like this: 1100, 1210, 1331. . . . .$2358 after 10th trade.

 

If you have a losing streak 10 trades: your account will get smaller like this: 900, 810 ...... $387 after 10th trade.

 

Using fixed amount, let's say $100 per trade will get you $100 x 10 trades = $1000 (you will have $2000 in total)

If you lose 10 trades in a row you will be broke. $0.

 

In both cases, winning or losing, you are better off using % on every trade, calculated on the amount of your account. 

You would have $387 after 9 trades,

if the following 9 trades are all winners your balance will be $912 so you have lost $88 despite having the same amount of winners and losers