Why do you limit the maximum drawdown on the account? - page 3
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In my opinion, it's simple.
You take your risk capital. Divide it in two parts. For example, 30/70 percent. You put 30 percent in a deposit to work on, and 70 percent in a bank account, for example, as reserve capital. You can also choose not to keep these funds in the bank, but to use them somehow, it is important that they can be immediately used for trading as soon as the need arises.
"Turn on reinvestment and work in peace. If the size of the securities account changes more or less, then the 30/70 ratio is violated, and it is clear that it must be periodically restored. The risk of a deal is calculated depending on the amount of risk capital available at the moment, the profit factor and diversification, but it is a separate topic, it is not that simple and cannot be explained in a nutshell.
In general, what I have written is a very simplified scheme and is simply an answer to the question of the topic.
In my opinion, it's simple.
Take your risk capital. Divide it into two parts. For example 30/70 percent. You deposit 30 percent for work, while 70 percent is deposited in a bank account as reserve capital. You don't have to keep this money in the bank, but you can use it somehow, So that they can be immediately deployed for trading as soon as the need arises.
That's the trap.
If there is more money in the account than the trader is willing to lose, then there is a chance that sooner or later the balance will be used up and, accordingly, can be drained.
I'm not going to argue because I'm lazy, no energy and in the end - useless....)))
I know your arguments by heart... I watched the ignoramuses Demura and Karabianz in this case. so it's ok to spread ignorance.
An investor who invests a large amount in a PAMM wants to make as much profit as possible, but also wants to limit his or her losses.
What is not clear about that? ))))
If you have a max. drawdown of 20%, what do you need the other 80% of your funds for?
Why do you need a speed monitor, etc.?
The answer is obvious - for reliability: life is expensive.
What makes you think you'll have a 20% slippage? What if it goes up to 80%? The market can give you any shit.
Also, calculate what the probability is of a 20% drawdown and an 80% drawdown on your system and compare those probabilities.
It's all clear with this one.
What's clear? What's the contradiction?
he wants profits based on the size of the entire investment, BUT he wants to limit the losses to some part of it. Isn't that nonsense?
If a lift weighs 1 tonne, why does it need 4 ropes, each of which can withstand up to 25 tonnes at breakage? Why do you need spring buffers at the bottom of the shaft?
Why do you need a speed monitor, etc.?
The answer is obvious - for reliability: life is expensive.
What makes you think you'll have a 20% slippage? What if it goes up to 80%? The market can give you any shit.
Also, calculate what the probability is of a 20% drawdown and an 80% drawdown on your system and compare those probabilities.
1. the comparison with a lift is incorrect in principle.
2. I don't think you understood what the message was.
1. If a lift weighs 1 tonne, why does it need 4 ropes, each of which can withstand up to 25 tons at breakage? Why do you need spring buffers at the bottom of the shaft?
Why do you need a speed monitor, etc.?
The answer is obvious - for reliability: life is expensive.
2. What makes you think that you will have a 20% slippage? What if it reaches 80%? The market can give you any crap.
Also, calculate the probability of a 20% drawdown and an 80% drawdown on your system and compare those probabilities.
1. it's a person's life Dima, it's priceless. When you open a business (deposit), you are risking your investment, not your life.
2. Read the first topic.
what is it clear? what is the contradiction?
he wants a profit, counting it against the size of the entire investment, BUT he also wants to limit the losses of his investment. is this not nonsense?
An investor who invested in PAMM 2000 will, at the end of the day, receive a profit of 2 times that of an investor who invested 1,000.
An investor who invests 2,000 in a PAMM will make twice as much profit as an investor who invests 1,000.