Quote:
Originally Posted by Dojiguy
If however you have a micro account of say $100 - $1000 that advice simply not valid for those accounts.
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Micro lot however with the same move would only produce $10 or less IF you follow the 2 - 3% percent of your account advice.
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So you will really need to take on more risk. I say 10% to 20%
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There is NO such thing as increasing your reward without increasing you risk.
People with very small accounts have the tendency to increase their market exposure so they think they would make more money. But before you start to trade you need to concentrate on what you can loos and not what you can earn.
If you take positions in such a way that you will increase your profits by a factor 10 or 20 (as you do by going from a 2% market exposure to a 20% market exposure) you will automaticly increase
your risks or drawdowns by the same factor 10.
If you have 1000$ to trade from or even 100.000$ to trade from you calculate how much % loss you want to take with the MaxDD.
And that never changes and will never depend on how much money you have in your account.
That is why R/R ratio is THE most important ratio you need to look at when you trade a certain system.
Newbies or amateurs have the tendency to increase their profits with a small acount but forget that they increase their losses with the same factor.
Again there is no such thing as doubling up your profits without doubling up your losses ( and as you suggest you will have losses or drawdowns that are even 10x times as big).
That means if a system would give you ONLY a 10% loss on your account when the biggest drawdown occured during a year with a normal 2% market exposure, that with your aproach one will loos 100% of the account ( in other words burning the account).
Or do you think that there is a system out there that will look to your account size in such a way that when you have a small acount that if it makes profit they will be big if you make losses they will be small?..
Or when you make a profit that the value per pip will be 1$ and when you loos that the value will only be 0.1$ per pip?...
If a system would exist for small accounts that can make big profits with small losses one would use that same system on big accounts.
Regards...iGoR