Risk management hack for private trader (short thread)

The P&L number in your trading often messes with your mind. Our relationships to money are too strong for it not too in most cases.

A useful hack is to try and reframe all your p&l in % terms.

1/4

One thing to try:

Multiply your Trading Capital by 20. E.g. Your account has $10k which represents your entire trading cap. Now you have theoretical Capital of $200k.

Now if you lose $1000. That hurts. But As % of theoretical cap its 0.5%. Feels less painful.

Also 2/4

Now you have to adjust your theoretical Cap. It’s now 20 x $9k=$180k. Now adjust your risk size accordingly. Protects downside.

Other considerations: If you make $20k that year. You didn’t make 200%. You made 10%. (It’s more realistic & keeps your feet on the ground). 3/4

These number are to play with, try different ratios which suit you.

P.s. Probably not best to risk 10% of your trading cap in one go, unless you prefer Vegas to Markets. 4/4