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Originally Posted by Rufanuf
Chinaforex
How long have you been making these kind of returns? All my education to date suggests that if people are hitting 100% per month they are using too much leverage its only a matter of time before you crash. My personal target is between 6% to 15% a month at present I consider that a tough call. I often make this kind of money for may be 3 months in a row bu then will lose say 20% to 30% in month. If you can show me a system that is 90% accurate I'll buy all the tea in China!
Ruf
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More important than the goal is the system's drawdown in determining how much leverage one can should use. For example a system with a typical drawdown of 40 pips can use quite an aggressive amount of leverage still maintain a relatively small absolute dollar drawdown. Someone with a 200 pip drawdown who trades at the same leverage as someone with a system with a 40 pip drawdown will experience 5 times the dollar drawdown in his account. So for such a system the leverage needs to be dialed down significantly.
I think traders need to determine how much of a dollar percent drawdown they are willing to accept in their accounts. Let's say you have $10000 determine that you want to endure no more than a 10% drawdown in your account. You are trading a system with a estimated drawdown of 125 pips on EUR/USD. If you imized your leverage how many units could you trade? The answer is 80000 units or 8 mini lots.
($10000 account balance * 10% desired drawdown) / .0125 ( pip drawdown)