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This page is purely a guide and details the thoughts of MrDayTrader.com
regarding account management and stake size. Each and every
individual trader has their own idea on how much they are
willing to 'risk' on each trade. Stop losses are a very important
part of our style of trading and in order for us all to be
successful they must, in our opinion be strictly adhered to!
Conserve Funds
We suggest not risking anymore than 7% of your account balance
on any one trade. Experience has shown us that stop levels
of 25 points on the FTSE and 40 points on the
DOW prove to generally be the most consistent.Therefore,as
a brief example:
You are about to enter new orders
for daily FTSE and your account balance is £1500, the
maximum you are prepared to lose on the trade is 7%. Simple
maths shows us that this is (7% of £1500) £105
and this sum divided by the stop level of 25 points (£105/25)=£5
stake per point move.
Realistic Targets
Because we suggest using the system in an almost 'automatic'
fashion, then we have to set very realistic targets, therefore
these targets might appear small. On our FTSE trades we set
limit or profit orders at 10 points. This has proven
to be a very attainable target for our analysis and losses
are very limited. Although, if you are able to watch the market
after your trade execution, then you can follow the market
with your stop loss (which we suggest should always be in
place and only adjusted nearer to the market and not widened)
and provided that the market trend is in your favour it is
very possible to gain many more points on the trade.
We use exactly the same criteria for
DOW entry and set our profit target at 25 points (revised
- up from +15 as of 01.09.04). As experienced traders
amongst you will know, the DOW can move very quickly in the
'right' and the 'wrong' direction and if you're able to watch
the market and 'follow' it with your stop, then quite substantial
gains can be accrued. But I must reiterate >'Never widen
your stop !'. If the market begins to turn, take your
profits and look forward to tomorrow.
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