Different Approaches to Risk and Account Sizes
June 29th, 2006Idempotent wrote an excellent post about risk as it relates to account size. He points out some interesting facts for those of us not lucky enough to have huge accounts to trade. He goes into detail about different approaches to risk per trade and how many consecutive losing trades it would take to deplete an account using each approach.
It definitely put things in perspective. What dawned on me was the sheer recklessness it would take to ruin an account. For example, at 2% risk per trade, Idempotent tells us that it would take 26 consecutive losing trades to lose $50K account. 26?!?!? Wouldn’t you realize you didn’t have an edge after the first dozen or so? 
It’s well worth a read as well as anything TraderMike writes about position sizing.
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