Risk Management and Your Frame of Mind Using 5% Rule


Often in the trade room you’ll hear our traders talking about how they have made their 5% for the day. In this video Darrell goes into what it means to have this risk management goal in place, both in terms of profit potential and managing loss. This is the first part of a webinar presented on October 10, 2013.


Great video. But I have a question in regards to the 6 trades. Is it 6 total trades per day on one instrument before you stop or you only stop if you have 1) have 6 consecutive losing trades or 2) reached your 5% goal for the day (I understand you can keep going with any excess over the 5%).

In other words, if you haven’t had 6 consecutive losing trades, you keep trading until you reach your 5%? (and then don’t give it back)


When you say 6 trades per one instrument is it also is it also per system on the instrument as well?


The 6 trades / 5% rule is NOT per system. Otherwise if you have several systems going at once you could risk 10%-15% of your account or more per day and we stress 5% a day Smith: You are not limited to only 6 trades per day. Just have your 5% risk being spread out over 6 trades. You would stop if you were down or up 5%