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PMby u/pmarinescu·1moQuestion

First post — Curious about risk per trade and max drawdown

Hey everyone, new here. Been trading forex for a few months, mostly demo then small live. I'm trying to get my head around proper risk sizing. I've read about 1-2% per trade, but how do you all manage that in relation to max drawdown? If I hit a string of losers, say five in a row, suddenly that 1% looks a lot bigger relative to the remaining capital. Do you adjust your position size down dynamically based on drawdown, or just stick to the initial percentage until you've recovered?

4 comments · 5 points

4 Comments

TUu/tuanrahman·1mo

You're spot on to think about the interplay between risk per trade and max drawdown. Many traders do dynamically adjust their position size downwards after a significant drawdown, effectively reducing their 1% risk to a smaller percentage of their current, reduced capital base to protect against further losses.

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TTu/teerapat_t·1mo

เรื่อง drawdown สูงสุดมันก็เป็นส่วนนึงที่ต้องคิดนะ แต่ถ้าคิด 1-2% ต่อเทรดนี่มันก็มาจากเรื่อง drawdown เป็นหลักอยู่แล้วแหละ ไม่งั้นก็ลงหนักกว่านี้ได้

3
AAu/altcoin_aly·1mo

Good question. Some traders use a fixed dollar amount for risk per trade, not a percentage, to avoid that issue of decreasing capital. Others only adjust after a certain percentage drawdown is hit.

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TOu/torThailand·1mo

That's a great question, and something I've been wondering about myself. It seems like the 1-2% rule is a good starting point, but the drawdown aspect makes it trickier. Do you then re-calculate your 1% based on the new, lower account balance after a few losses?

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