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Total Account Risk Calculation

 
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arcade

Total Account Risk Calculation

Hello Trading Bee's,

I put together a video question for my coach and I thought I'd post it here to get feedback from the group. 

Thanks

Video Question: Whats the best way to calculate my total account risk of all open and pending positions?

https://www.loom.com/share/27f96ba190304131b51a404fddd4df0b 

Thu, 11/21/2019 - 9:49am
 
stanmkhabele

I'm also interested in the reply because I frequently "front-run" my orders following my predictive analysis. It sometimes happen that many of these fill during the same trading period and upset the risk borders.

 
broslansky

arcade,

You divided the original risk by 2 and then divided by 2 again, making 1/4 of original risk.

So, to calculate your %Risk, please explain why you wouldn't reverse the division, ergo multiply by 2 and again by 2, rather than by 3, as stated in the video?

 
Rookie

Damm the torpedoes full speed ahead, not!

Great question Randal,

I'll let u and bro argue out the math, the other side of the coin gets a little more involved because you could also say as positions go in your favor the risk is lessened, or when a trade hits break even you can remove it altogether.
I do know an Apiary trader does do all this on the fly and more with a spreadsheet. I'm just not that smart or quick.
So I use two simple rules.
1. never use more than 50% of my available positions, except in a fix-it mode (even then this is questionable for obvious reasons)
2. 1% is my risk tolerance and 2% is where I dump the cart and call it a day.

Rex has his rules and Kevin has slightly different rules tailored to his trading. However more accurately all rules must be based on the stats of winners in a row vs losers in a row and their respective amounts. https://apiaryfund.com/forum/equity-aka-homework
This your trading in action. You can't mix different methodologies, the stats if the short term must all be short term and the same for the long term or do two sets of stats from two different accounts.

Another excerpt from the archives of "do as I say and not as I do".

 
arcade

I've never spent this much time on risk management (obviously) and I'm so happy to have found this group to assist us all to become consistantly profitable. What I like the most about risk managment is that it has help reduce my stress level as I know I'll not blow up the account when I position size correctly.

Bro, I don't know. I'll ask Rex at my next meeting one on one.
Rookie, Thanks for the feedback. Being at the beginning stage I'm just trying to figure out how the Watch works. My goal is to understand it then make is as simple as possible so I can focus on looking for setups. Thanks again.

 
Rookie

Simple is the one-click box.
It doesn't matter what you put in the TP-Tale Profit - Target box
the %R is the amount of your equity you are willing to risk if you lose, Remember the goal is to survive to trade another day.
Now the SL-Stop Loss box is what really counts here and is what the formula is based upon, to tell you how many trades fit in the risk percentage, %R.
We do not have to calculate the value of the currency pair it is done for us and note on the info line there it is.
In the attached example the equity in this account at a 25 Pip risk AKA Stop Loss at 1% will allow 3 trades.

So what's the rub, it is the quantity box, IE the cash amount you want o put up or shut up, Its the entrance into the game of probabilities that says your right. Again the attached example shows if we take all three trades at the set Stop Loss we could lose just over $4.00 per trade or $12.50. if we change the %R to .1 we see that we can lose $25.00 with 1 trade.

On the other hand, if we take all three trades and are fortunate enough to have it tun our way and don't get any fear of loss we would make $25.00 because of the desired ratio.

That's it on the surface but it's still flying by the seat of our pants. Why because with a little refinement we can tilt the odds in our favor. By using the Apiary back office we get the expectancy and time in the trade as well as the aver win and average loss which will help us adjust the one-click to refine our trading style.

With a modern pencil and paper AKA spreadsheet, we can go to the next level by downloading or trades and computing the winners in a row along with losers in a row and their respective. If we know that after 8 wins we will have 3 losses can that help with the amount we will bet on the first few trades and when to back off?

Personally I keep it a little easier than that. When I scalp I want to earn about $1.00 per two pip trade after costs, That's why I use .06 lot size. A smaller equity account and I would reduce that too.03, a larger equity account and increase to .10. If you blend that information with the win-loss ratio it is relatively easy to calculate your daily earning.

So what left its called psychology. Can we consistently trade out rules to maintain a consistently positive outcome?

One -Click.PNG
 
dannywhite3298

Rookie,

I have started closing all my positions at the end of the trading day, before the pip count resets. I hate carrying losing trades over and starting the new day 100 to 500 pips down. I’m not very good trying to fix bad trades, I only dig my hole deeper.
I also only use no more than 50% of my available trading positions and if I hit -2% on my daily return I close down for the day, as you. I finished my Thanksgiving Trading day 615 pips up and all positions are closed. Todd Granthem’s 89 HMA shotgun strategy has turned my Trading around to the good.

Good Fortune to You,

Danny

84943160-7954-4F5E-9E27-357672FD7E28.png
 
dannywhite3298

A

 
Rookie

Danny, that's very good to learn, your day is impressive especially in view of holiday trading.

Nice chart, are you trading the pivots? or Todds HMA 89?

 
dannywhite3298

Rookie,

I have the pivots on my chart out of habit or I like the way they look. I also use them as a reference. If one appears I know a pullback may be coming soon. I trade Todd’s HMA 99% of the time.
Danny

 
Rookie

Thanks, Danny! Happy Turkey Day!
Keep on trucking...

 
rickv

Great info, Thank you!