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No Ordinary Duck
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You must be an accountant!
300 shares!
$15000 CFD account 1% risk management
- Thread starter Pappon
- Start date
You must be an accountant!
300 shares!
Thanks for the replies,
Nick Radge thanks for posting the chart showing the impact of rake (commision) on trading. And also making the point that tading shares is not a zero sum game.
I do have a few questions in regards to that chart though for Nick,
What was the commission rate for the account?
Also why is there such a large discrepency between the $10k AND $25k account but the difference between the $25k and $50k is negligble in comparisson though the cash difference is similar?
Nick Radge thanks for posting the chart showing the impact of rake (commision) on trading. And also making the point that tading shares is not a zero sum game.
I do have a few questions in regards to that chart though for Nick,
What was the commission rate for the account?
Also why is there such a large discrepency between the $10k AND $25k account but the difference between the $25k and $50k is negligble in comparisson though the cash difference is similar?
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The example uses $6 minimum or 0.08%. Risk per trade was set at 2% of account balance.
The major issue arises with the minimum charge. As the account size rises, the percentage or 'drag' remains a constant. However, the smaller the account size goes the larger the percentage the $6 becomes in the equation. It because if this that causes the discrepancy.
The major issue arises with the minimum charge. As the account size rises, the percentage or 'drag' remains a constant. However, the smaller the account size goes the larger the percentage the $6 becomes in the equation. It because if this that causes the discrepancy.
Thanks for your post Nick,
your chart and explanation is a very comprehensive response,
my only issue is that the risk per trade is set @ 2%.
If by lowering the risk to say 1% (as outlined in the original post) and hence the initial position size and cost of trade will this affect the profit curve?
thank you in advance
your chart and explanation is a very comprehensive response,
my only issue is that the risk per trade is set @ 2%.
If by lowering the risk to say 1% (as outlined in the original post) and hence the initial position size and cost of trade will this affect the profit curve?
thank you in advance
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It should. My guess is it the lines won't rise as steeply (i.e. less return over same period).
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Lowering the risk from 2% to 1% will make the smaller accounts drag even more.
Example:
Account Capital $5000
where,
2% risk per trade = $100
$6 min comm's = 6% drag
1% risk per trade = $50
$6 min comm's = 12% drag
Now take a larger account:
Account Capital = $50,000
where,
2% risk per trade = $1000
$6 min comm's = 0.6% drag
1% risk per trade = $500
$6 min comm's = 1.2% drag
This last example is not quite 100% accurate because it assumes that the underlying value of the trade is always < $8000. From experience about 6% of trades using a 1% risk will be less than $8000 whereas at 2% about 40% of trades will be over $8000 therefore 0.6% drag will be higher.
Example:
Account Capital $5000
where,
2% risk per trade = $100
$6 min comm's = 6% drag
1% risk per trade = $50
$6 min comm's = 12% drag
Now take a larger account:
Account Capital = $50,000
where,
2% risk per trade = $1000
$6 min comm's = 0.6% drag
1% risk per trade = $500
$6 min comm's = 1.2% drag
This last example is not quite 100% accurate because it assumes that the underlying value of the trade is always < $8000. From experience about 6% of trades using a 1% risk will be less than $8000 whereas at 2% about 40% of trades will be over $8000 therefore 0.6% drag will be higher.
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