Listen "Why it's smart to Trade below your maximum risk"
Episode Synopsis
Your max risk per trade is just that - your max. You might consider trading within that risk measurement. Why? Murphy's Law. Take that into account when you are position sizing your trades. You can normalize risk across all instruments so that you can think of each security in terms of risk units, that is, shares or contracts per unit. That's achieved by calculating the volatility of each instrument. In position sizing this way, you won't trade one more aggressively than another. They'll all be the same risk % to your overall account. For example, given the prevailing volatilities, 26 contracts of Sugar might be equal to only 6 contracts of Crude Oil in terms of percentage risk to your capital. Each would be a 1% risk unit even though Sugar has 4x plus more contracts than Crude Oil.
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