Betting Enough 2

Almost anyone can make money in a bull market. But Market Masters who have proven their survivability and success in the ups and downs of many market cycles have advocated keeping your risk on every trade at 1% or 2 % of your trading capital.

So how does that work ?

Let's say your trading capital is 1,000,0000 pesos.

Before you buy a stock, you need to be able to fix at what price below your entry price you will say that you are wrong and cut loss.

Let's say your trading rules says that you have to make an automatic cut loss at 8 % below your entry price. and you are willing to risk 1 % of your trading capital on one trade.

So 1% of 1,000,000 is 10,000 pesos.

and your maximum bet on one stock is 10,000 / .08 = 125,000 pesos

if you are able to increase your risk to 2 % of  your trading capital 1,000,000 and a cut loss point of 8% , then

2% of 1,000,000 is 20,000 pesos

and your maximum bet on one stock is 20,000 / 0.8 = 250,000 pesos.


So in the above example,

you can bet between 12.5% to 25 % of your trading capital.

Please take note that if your cut loss point is less than 8% , then your maximum exposure in one stock will also increase.