$15000 CFD account 1% risk management

[Pappon]

Hi guys looking at opening up a $15000 MFGlobal CFD account need some info on this can you tell me 1st would $15000 be sufficient capital to fund and trade a CFD account?

Okay for starters i'm not going to be doing analysis myself i'll be learning (as i'm a beginner) but trading on trading recommendations from a reputable website.

So let's get into some calculations to see if i've got this right i understand +EV and risk management i just want to see if i have done the calculations correct.

Let's say i want to use 1% risk per trade to start this is $150 i'm willing to lose per trade and as i've seen i'll be losing majority of the time however the winning trades profit will outweight the losses provided analysis is correct.

Let's say i want to take a trade on 1000 JOE BLOW shares at $3 a share it's going to be a $3000 trade on a 10% margin 10:1 i'll be up for a $300 deposit correct so far?
Now if i have a 1% risk per trade i'm only willing to risk $150 on this trade as per my risk management strategy i'll be looking at putting a stop as i entry on this trade at $2.85 as 1000 x $2.85 = $2850
ie $3000-$150 =$2850 is this the correct way to calculate this?

Now as stated before i WILL NOT be punting i will be trading from a very reputable trader's recommendations AND stops will be used for risk management the plan is to follow the plan, yes slippage can occur. Is a margin of 10% as i quoted above to high with this capital ($15000) even with stops in place (as i feel the risk has been calculated for?) if so please advise.

 

[skc]

Hi guys looking at opening up a $15000 MFGlobal CFD account need some info on this can you tell me 1st would $15000 be sufficient capital to fund and trade a CFD account?

Okay for starters i'm not going to be doing analysis myself i'll be learning (as i'm a beginner) but trading on trading recommendations from a reputable website.

So let's get into some calculations to see if i've got this right i understand +EV and risk management i just want to see if i have done the calculations correct.

Let's say i want to use 1% risk per trade to start this is $150 i'm willing to lose per trade and as i've seen i'll be losing majority of the time however the winning trades profit will outweight the losses provided analysis is correct.

Let's say i want to take a trade on 1000 JOE BLOW shares at $3 a share it's going to be a $3000 trade on a 10% margin 10:1 i'll be up for a $300 deposit correct so far?
Now if i have a 1% risk per trade i'm only willing to risk $150 on this trade as per my risk management strategy i'll be looking at putting a stop as i entry on this trade at $2.85 as 1000 x $2.85 = $2850
ie $3000-$150 =$2850 is this the correct way to calculate this?

Now as stated before i WILL NOT be punting i will be trading from a very reputable trader's recommendations AND stops will be used for risk management the plan is to follow the plan, yes slippage can occur. Is a margin of 10% as i quoted above to high with this capital ($15000) even with stops in place (as i feel the risk has been calculated for?) if so please advise.

Goes the other way... you want to buy at $3 and believe a sensible stop loss is $2.85. You then calculate back and see that you can purchase 1000 shares based on $150 risk. If the logical stop loss is $2.5, then you can only purchase 500 shares.

The market doesn't observe your stop loss base on the capital you have, so neither should you. Many people here explain this before and way more elegantly. Do a search on risk management, money management or fixed fractional position sizing (i think).

On $15K account, you will be surprised how much commission affects into your overall performance. I also found that with a small account you may sometimes force yourself to put in really tight stops so you can trade larger positions... as such you don't give enough room for the various noises.

Good luck.

 

[Pappon]

Goes the other way... you want to buy at $3 and believe a sensible stop loss is $2.85. You then calculate back and see that you can purchase 1000 shares based on $150 risk. If the logical stop loss is $2.5, then you can only purchase 500 shares.

The market doesn't observe your stop loss base on the capital you have, so neither should you. Many people here explain this before and way more elegantly. Do a search on risk management, money management or fixed fractional position sizing (i think).

On $15K account, you will be surprised how much commission affects into your overall performance. I also found that with a small account you may sometimes force yourself to put in really tight stops so you can trade larger positions... as such you don't give enough room for the various noises.

Good luck.

Thanks for the reply skc, still given the level of leverage with the risk management would you say it's too difficult to make a profit with $15000 on 10% margin?

 

[Pappon]

The market doesn't observe your stop loss base on the capital you have

okay i understand, if support is where the stop loss is ($2.50) at placing a stop based on capital ($2.85) is silly as it could be a stop which doesn't take in account day to day movements, starting to understand

 

[skc]

Thanks for the reply skc, still given the level of leverage with the risk management would you say it's too difficult to make a profit with $15000 on 10% margin?

Many traders set a limit of how much they can lose on a really bad day. That is, a really bad day where every single one of your stop losses are hit. This limit may be something like 15-20% of your capital (which is ~$3K), but it really depends on your risk appetite. Do a search on Portfolio Heat.

Assuming your average stop loss is 5% away from the current price, the most total position size you will command should probably be around $60K (i.e. $3K portfolio heat limit divided by the 5% stop). So you probably won't have to worry too much about running out of margin.

Many beginners start with small capital and fail, not because of small capital, but because of poor skill. i.e. small capital is correlated to high failure rate, but it doesn't cause high failure rate. So anything is possible, as long as you are good!

Amongst the 200K members on this forum I probably rank 150,000th in terms of expertise. So do read widely from other more experienced traders (no. of posts is a good indicator.

 

[many@k]

Hi Pappon,
Just want to ask how u went with this project as I'm thinking of doing exactly the same thing. What have your result been like and do you think that your initial outlay was substantial?
I look forward to your reply.

 

[jono1887]

Now as stated before i WILL NOT be punting i will be trading from a very reputable trader's recommendations

How did these recommendations go? been profitable yet?

 

[johenmo]

Hi Pappon,
Just want to ask how u went with this project as I'm thinking of doing exactly the same thing. What have your result been like and do you think that your initial outlay was substantial?
I look forward to your reply.

I've just received "Supercharge your trading with CFDS" by Jeff Cartridge. Seems a good book to explain CFDs. Was recommended to me by Beamstas (Thanks !!). Well worth the cost in my opinion for someone who doesn't know much about CFDs. Especially the risk level when compared to options, warrants, futures, etc.

 

[many@k]

Thanx johenmo,,
been reading the bible of trading Adaptive Analysis. Will have a look @ your recomendation.
Still would like to get feed back on Pappon's experience of capitilisation of his trading account. And whether is was substainable to allow for variance whilst being able to beat the rake (commision).

 

[tech/a]

Now as stated before i WILL NOT be punting i will be trading from a very reputable trader's recommendations

What makes you think this isnt punting?

Thanks for the reply skc, still given the level of leverage with the risk management would you say it's too difficult to make a profit with $15000 on 10% margin?

Think and trade in terms of return on capital not how I can make $500k from $15,000.
20%+ is an outstanding return.So thats $3000/year not $3000/week!

 

[Nick Radge]

Here is a slide from my seminars last year that compares the impact of 4 different account sizes. Each account took the exact same trades. The outcome shows the impact of commissions on smaller accounts.

This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

 

[Sean K]

What makes you think this isnt punting?



Think and trade in terms of return on capital not how I can make $500k from $15,000.
20%+ is an outstanding return.So thats $3000/year not $3000/week!

He's not punting he's trading and asking for advice. He's including money management in the plan.



God knows how you've concluded he was trying to make $3000 a week.

 

[tech/a]

He's not punting he's trading and asking for advice. He's including money management in the plan.



God knows how you've concluded he was trying to make $3000 a week.

Ah
I see---so using fixed fractional Position sizing to determine risk and position sizing means I'm not gambling.Simply by adding this to Lotto/Pokies/Horse racing/roulette/poker/trading---then I'm not gambling.

The $3000 was an example as $3000 a year at 20% is a good return just dont expect that in a quicker time.
But you knew what I was getting at Kennas,youre just bored.

 

[Sean K]

But you knew what I was getting at Kennas,youre just bored.

Yep.

 

[skc]

Add another line below that with CFD accounts, where you are paying 7-8% interest on full position size. Assume one is holding $20K position on average, that's $1.5K on interest alone...

 

[manuelg]

Goes the other way... you want to buy at $3 and believe a sensible stop loss is $2.85. You then calculate back and see that you can purchase 1000 shares based on $150 risk. If the logical stop loss is $2.5, then you can only purchase 500 shares.

On $15K account, you will be surprised how much commission affects into your overall performance. I also found that with a small account you may sometimes force yourself to put in really tight stops so you can trade larger positions... as such you don't give enough room for the various noises.

Good luck.

Agree with this 100%. As someone who has only been trading for approx 12 months I am still relatively inexperienced but have learnt a great deal. I also use some recomendations (probably the same website you are reffering to) but have been having more success using similar techniques to find my own opportunities.

Defenitely determine the stop loss price first, then work out the size of trade to keep the risk within your acceptable limit. Also, I use IG Markets (havign tried another DMA CFD provider i wasn't overly happy with) and they charge 0.1% commision regardless of trade size. So $3000 trade = $3 buy and $3 sell. This means commisons have very little impact on my results.

 

[skc]

Agree with this 100%. As someone who has only been trading for approx 12 months I am still relatively inexperienced but have learnt a great deal. I also use some recomendations (probably the same website you are reffering to) but have been having more success using similar techniques to find my own opportunities.

Defenitely determine the stop loss price first, then work out the size of trade to keep the risk within your acceptable limit. Also, I use IG Markets (havign tried another DMA CFD provider i wasn't overly happy with) and they charge 0.1% commision regardless of trade size. So $3000 trade = $3 buy and $3 sell. This means commisons have very little impact on my results.

Really? I think that's just a special introductory rate for the first 6 weeks. Could be wrong though...

 

[manuelg]

Actually you could be right on that, since I only opened the account with them recently and was suprised by the low commision (was expecting $8 minimum). Shame.

 

[voyz]

i only pay 0.1% of trade size brokerage on all my trades too for year and a half now. thoght this was a standard thing? so to buy 1000 shares of jb hifi at 1700 its 17buks.

 

[skc]

i only pay 0.1% of trade size brokerage on all my trades too for year and a half now. thoght this was a standard thing? so to buy 1000 shares of jb hifi at 1700 its 17buks.

Try buying 100 JBH and see what commission they charge. $1.7 or $8?