Hi guys, a quick look at some of our older posts: here's one from a year ago, and it's about our handy tool aimed to help you to calculate and manage your risk as a percentage of your, hopefully growing, account size. There are many ways to define risk per trade, "fixed percentage risk" being one of them, and a useful one.
Once we're on the subject, this calculator also helps you to define what account size is needed to trade a given strategy.
Let's assume you have a trade idea and you develop it into a system. Let's call it System One. The first question must always be: do I have enough capital to trade System One? The Remek! Calculator helps you answer that question. Say, you've done 100 trades with System One, and recorded the results. Now enter those results (including the required stop to trade the system) in the appropriate fields in this calculator, and the required account size will be calculated for you. If you do not have the required capital, you either have to increase your capital or look for another system that you can trade with your existing capital. A word of caution: violating these simple rules usually doesn't lead to anything good...
What if you have another system, System Two, and you want to see how it compares to your System One? We have a tool for that too!
But remember: we can spend all the time we have doing stats and crunching numbers, we can even put on a hundred perfectly executed trades, but we will still not be able to eliminate the inherent unpredictability of this mostly random data series called "the market". Read Adam Grimes's excellent post (and this other one, too) to see just what we're dealing with.
Mindful trading, folks!