(David) Cash Risk

...continued from yesterday

The formula that David Cash used for calculating how much money to use on his next trade during the competition was:

Number of contracts = [% Risk x Account Equity] / [Trade Stop Dollar Value]

His recommendations for % Risk are as follows:

Beginners and conservative traders: 5 to 10%

Experienced traders: 10 to 20%

David says during the time he competed in the World Cup trading competition, he went as high as 25% for % Risk but recommends against doing that.

David also advises that you need to “trade a risk percentage large enough to generate strong equity growth” but not to put on such a large trade that the potential drawdown might wipe out your account. He says his research indicates that keeping the % Risk constant over a long series of trades is better than varying it over the course of the same number of trades.

continued tomorrow ...

Copyright 2007 Raymond T. Lee. All rights reserved.
Leisurely e-Mini Futures Trading
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