The concepts of risking 1% of your capital and using 1% of your capital as a position size are often confused, but they represent two very different approaches to position sizing.
Risking 1% of Your Capital When you risk 1% of your capital, it means you are willing to lose 1% of your total capital if the trade goes against you. To calculate the position size in this case, you consider the stop-loss level. For example, if your total capital is $10,000 and you’re risking 1%, that means you’re prepared to lose $100 on the trade. The position size is then calculated based on how far your stop-loss is from your entry price.
Example: - Capital: $10,000 - Risk per trade: 1% = $100 - Stop-loss distance: 5% from entry price - Position size: $100 / 5% = $2,000
So, the position size would be $2,000, but the actual amount at risk is only $100 due to the stop-loss.
Using 1% of Your Capital as Position Size In this approach, you're directly using 1% of your total capital to buy into a position. It doesn't take into account the risk or the stop-loss distance. If your capital is $10,000, using 1% as your position size means you're buying $100 worth of the asset, regardless of the potential risk.
Example: - Capital: $10,000 - Position size: 1% = $100 - This $100 is your total investment in the trade, no matter where your stop-loss is.
Key Difference: -Risking 1% focuses on how much you are willing to lose and adjusts the position size accordingly based on the stop-loss. It’s a risk management strategy. - Using 1% is simply allocating a fixed percentage of your capital to each trade, without considering the specific risk on that trade.
They may sound similar, but one is risk-based, and the other is simply about investment allocation.
Thông tin và ấn phẩm không có nghĩa là và không cấu thành, tài chính, đầu tư, kinh doanh, hoặc các loại lời khuyên hoặc khuyến nghị khác được cung cấp hoặc xác nhận bởi TradingView. Đọc thêm trong Điều khoản sử dụng.