Risk Appetite

[#1]

I am just wondering how geared traders prefer their portfolios to be. If your trading account has, let's say, R 50000, how much exposure would you feel comfortable enough having. Obviously different stokes for different folks. Personally I do not like to be exposed to more than 3 times my capital.

[#2]

I always work on a worst case scenario. If I cannot deal with the worst case scenario, financially or emotionally, I will not go for it no matter what potential rewards. This holds true for business deals, relationships, and trading.

[Terra]

Five, I like your way of thinking.

[richardw]

So...trade as if there was an asteroid about to hit your city?

[john_1]

what you saying..invest off shore?

[HateGauteng]

Go all in on the highest geared derivatives. If you go down, at least do a proper job of it.

[kwagga]

As a general rule most futures traders don't expose more than 2-6% ( google 2 percent rule ) of trading capital to the market at any one time on a trade. That means you're actually wasting your time if you don't start with at least R 250 000 in your portfolio. The idea is capital preservation. You cut your losses to a minimum; you go with the trend when you're in the money. That way you only need more than 50% of your trades to be successful and you live to trade another day when a trade turns against you. You have a fixed stop loss when entering and a fixed exit strategy before entering into a trade, and you stick to it. You need rules and you trade those rules with discipline and patience. You bet the house, you loose the farm.

[suki]

is this what Gareth usually use when trading SSF on summit tv?

[kwagga]

Yes. It's a tried and tested rule that works world wide.

[PaulC]

Bet the farm. If you win bonus. If not take a loan and buy another farm ....

[SimonPB]

nah .. bet the neighbours farm .. if you win now you got a farm .. if you lose, well it was never your farm anyways ???

[TOPIX]

All new traders make the mistake of measuring risk in isolation. Risk is a function of position size and distance to stop loss. But, Real Risk also has to account for probability. This is the edge that trading a system consistently gives you. For example, if you have a win rate of 60%, then a trade risking 100 points to make 100 points is a 3 : 2 Reward:Risk and not 1 : 1 as many would believe. The higher your win rate, the lower your Real Risk and therefore the more you can risk per trade. If you understand this concept, you can make good returns with low risk.

[richardw]

No, just that 'worst case' is usually far worse than you think it is!

[HateGauteng]

schweeet . .. I'll bet your farm.