[Paladin]

Hello, to everyone!

I have a pretty simple question, but still. What amount of capital should I use per one trade.

What lot size to pick. It is so interesting to invest all you deposit when you are 100% sure you will win.

[SIUYA]

you may be100% sure you will win, but the market will make 100% sure that you will loose over the long run.

If you want a good source of money management ideas. Try www. breakoutfutures .com
There is plenty of info already here on TL also answering your question

[cashonly]

Look at the worst case scenario if that particular trade went against you. How much could you lose while sticking to your trading plan and without your emotions kicking in to cut your losses earlier than your plan dictates?

Work backward from there in terms of price of stock, trade size, entry/exit points. Use entry & exit points that make sense to THE MARKET, not to you. Just saying, I'm using a $1 stop because that's all you want to do is the wrong approach. Look at things the market is looking at... whole numbers, MA support, 52 wk hi/lo, prior day hi/lo, etc.... for your exit / entry points. Then, determine the amount you would be willing to lose in the worse case loss scenario. If it gives you a trade size so small as not worthy of trading (ie: in the extreme, think BRK.A), then move on to a different instrument.

No matter how good the plan and strategy, if you're not comfortable with the loss you'd incur on a trade, and things get ugly, you're not gonna stick to your plan and that's as bad as trading with no plan at all.

[Oldwolf]

I would say that 10% of account is max lot size you can trade with. In casual trading it is much more less.

[zeke]

i say start with the minimum amount !! as you start winning then increase slowly !

[BlowFish]

If you have positive expectancy trade small enough that the law of large numbers works for you. If you don't have positive expectancy go all in before the law of large numbers works against you. If you are 100% sure you will win go all in using the most highly leveraged instrument you can find, borrow money against your house, from your family, sell a kidney.

Alternatively learn how to calculate risk of ruin (RoR), then you will be able to decide for yourself with some confidence.

[mathew.luk]

It depends, for me it is about 2-5% of my capital.

I think it really depends how much you are willing risk/lose for each "chance" to win. For me I just see each trade as a probability to win, but never as 100%. You can always improve your probability of each trade by looking for techniques/setup that historically or statistically yield higher returns.

However, no matter how good I think my chances are with a trade, I always keep in the back of the mind whatever I trade might next day have a chance to big go against me in a really bad way so I never take a massive position. It is really back to the basic, the trade off between return and risk.

As to investing everything in one trade that you are 100% sure of, well I used to do it when I started trading stocks with about 5k. I didn't really had any option but to be aggressive. Once I build up my capital, I don't use that money management approach anymore.

And if you can find these 100% sure opportunities consistently over time, sure. Otherwise this "all in" approach is more likely to do you more damage than good in the long run.

[TraderWill]

Your starting capital will depend on how well your methodology performs. For example, if you have a system that gives you about 65% win rate then statistically you have a very high probability of getting three losing trades in a row. You also have about a 1% probability that you'll get ten losing trades in a row. A 1% probability is very low but if you trade 200+ days each year it will probably happen to you once or twice during the year.

It's usually best to plan for the worst case. You know Murphy's Law will kick in at the worst possible moment, right? Now the question is how big of a hit to your account do you think you can handle financially and mentally. Can you live with a 10% hit? A 20% hit? If your system has 65% winners you know you'll recover either way. In the case of a 10% drawdown you'll need to make back 11%, with a 20% drawdown you'll need to make back 25% to get to your previous equity high.

Let's assume that you can deal with a 20% drawdown. That means that the 10 losing trades in a row add up to 20% of your account, so on average the maximum risk you want to take on any single trade is 2% (10 X 2% = 20%). It's actually a bit more complicated than that but this simple calculation gets you close. Similarly if you think that you can only be comfortable with a 10% maximum drawdown then you should risk no more than 1% of your account on any single trade.

That was a long way of saying that I agree with the earlier post that you should risk no more than 1% to 2% of your trading capital on each trade.

From that you can back into the size of account that you need. If your system's method has average losing trades of 20 pips and you're trading a single mini lot, then your account size X 1% has to equal $20. So a $2000 acount would be your minimum size, $2,000 X 1% = $20. If you want to be even more conservative use the size of your largest losing trade instead of average losing trade.

Good luck in your trading.