![]() More.Even if I understand why they exist (easy to understand, apply and at least give some thinking about risk into the process) simple rules of thumb like ânever risk more than 2% in any positionâ, I think they often miss the point.įirst, they only refer to the risk of one position whereas normally people normally wants to manage risk for their account. If you have two losses in a row it compounds though. Let me calculate out for 5% just because I never have. Calculate percentage gain required to be back to breakeven. ![]() Take amount, divide total/drawdown result amount. So you have a half a percent handicap actually with that drawdown only. You need to win 2.05% back to get back to $100. Lets say you have $100 and have a 2% loss to $98. To calculate win rate required per drawdown. If a trade costs $10 with a capture/stop of $100 you have a 10% handicap.Īll of these different factors must be accounted for. ![]() You also need to calculate for commissions/spread handicap. It's how much of a drawdown that position size creates when it hits your stop out point. The higher your drawdowns the higher the win rate required to stay positive. ![]()
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