{"id":4663,"date":"2010-04-26T08:36:07","date_gmt":"2010-04-26T12:36:07","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=4663"},"modified":"2013-04-10T17:11:59","modified_gmt":"2013-04-10T21:11:59","slug":"traders-ask-too-much-risk","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/traders-ask-too-much-risk","title":{"rendered":"Traders Ask: Too Much Risk?"},"content":{"rendered":"

I received this email over the weekend from Reader David, a developing trader, improving daily:<\/p>\n

Hey Bella!<\/p>\n

How bout’ this market! Just so much opportunity, and great setups that
\nI am seeing everyday. Today that trade was ABIO over 5. I got long 2
\nlots on the break and added above 5.50, sold out near the highs and
\nwaited for a pullback to get involved again. After that I had a few
\nnice .25-.40c scalps off of the 5.20 level. This hotstreak I have been
\non has been quite remarkable, I can count the # of losing days in the
\npast few months on 1 hand. Now I have a question. Is there such thing
\nas having too much buying power? I have built up a nice bank roll,
\nwith my year to date profits …….. I have been increasing my
\nsize on the A setups and getting good results. I am trying to stay in
\nthis groove that i’ve been in. I realized yesterday that I might
\nactually have too much buying power, which could potentially tempt me
\nto take too much risk. I got short 1k AMZN at 142, and covered around
\n140 – yes it was a great trade but I had no business taking that
\namount of size. This is what I like to call a “good problem” to have.
\nDo you have any thoughts on this? Thanks in advance, have a great
\nweekend and enjoy the beautiful weather!<\/p>\n

Bella Responds:<\/p>\n

When we make an A trade we risk 30-40 percent of our intraday stop loss limit. \u00a0So if our intraday stop out is $1000, then we will risk $300-$400 on an A trade. \u00a0You might develop a system for how much risk you take on your A trades. \u00a0Consider creating mandatory risk for your A trades. \u00a0Most developing traders do not have enough risk on with their A trades. \u00a0Also you must define your risk correctly.<\/p>\n

Check out GMan’s video on risk<\/a> to our desk for a further explanation.<\/p>\n

So do not focus on the buying power consumed. \u00a0Focus on your risk.<\/p>\n

I hope that helps.<\/p>\n

Bella<\/p>\n","protected":false},"excerpt":{"rendered":"

I received this email over the weekend from Reader David, a developing trader, improving daily: Hey Bella! How bout’ this market! Just so much opportunity, and great setups that I am seeing everyday. Today that trade was ABIO over 5. 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