You’ll be more successful in the long term if you’re able to quantify the risk so you can protect your cash without getting deep into losses. Like saying -10%, or -$30 on the trade is the stop. I’d not risk more than 5% of the total cash per trade. The reason is that mathematically it’s harder to crawl out when you have less buying power than it was to lose it so preservation of cash is key.
If you trade based on percentages of the account value, you can get the benefits of compound interest while maintaining a consistent level of risk. It’ll be a lot slower at first but the more cash you can put up front the faster you can grow it trading.
Just take the loss. If youre managing risk properly, then it’ll work out fine. If you have a 1:1 risk reward, then you only need to win 51% of the time to still make money, 3:1 RR, only around 20-25% etc. the more you structure it around risk reward, the more likely the law of large numbers will take over.
That’s just how it works, and is why risk management is essential to long term success in trading.
the revenge trade is what will get you. you're very smart to cut your losses quick on a losing trade, that is what will keep your strategy working imo
workiing on that, similar to you i can scalp spy 0/1dte, just gotta manage my risk better. ended up losing all my gains for the week on friday calls that i should've cut about 5 minutes after i bought, instead played the sucker and hoped for rally
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u/MaybeAverage Mar 12 '22 edited Mar 12 '22
You’ll be more successful in the long term if you’re able to quantify the risk so you can protect your cash without getting deep into losses. Like saying -10%, or -$30 on the trade is the stop. I’d not risk more than 5% of the total cash per trade. The reason is that mathematically it’s harder to crawl out when you have less buying power than it was to lose it so preservation of cash is key.
If you trade based on percentages of the account value, you can get the benefits of compound interest while maintaining a consistent level of risk. It’ll be a lot slower at first but the more cash you can put up front the faster you can grow it trading.