Future has a leverage at 10 times, which means that you invest $1 and trades like $10 [Corrected]. I would like to know how to apply One Percent Risk in this case.
Does anyone have any suggestions?
Thanks in advance for any suggestions
The one percent risk rule is calculated as follows:
â€¢Maximum Capital = Account Size / 100
â€¢Trade Size = Maximum Capital / ((Entry  Stop Loss) x Point Value)
How to apply One Percent Risk on future?
How to apply One Percent Risk on future?
Last edited by oem7110 on Wed Nov 07, 2012 4:58 am, edited 1 time in total.

 Roundtable Knight
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I think there is a bit of muddled thinking here somewhere. First of all, as I am sure you realize, the statement "futures has a leverage at 10 times" is misleading. Leverage varies widely depending on market conditions and the particular instrument you are trading. In any event, in my book leverage of ten times means that if you "invest" $1 it "trades like" $10, not $20. The answer to your question is simple arithmetic. If you wish to risk 1% of your account value per position the entry risk multiplied by the point value must not exceed said 1%. If the contract is too big (the point value too high) then don't take the trade.
Am I missing something here?
Am I missing something here?
Would it be possible to convert following formula using percentage instead of point value?AFJ Garner wrote: ... If you wish to risk 1% of your account value per position the entry risk multiplied by the point value must not exceed said 1%.
...
Capital : 100000
Stop Loss: 1%
Do you have any suggestions on how to determine the Trade Size in term of percentage of Capital?
Thanks you very much for any suggestions
The one percent risk rule is calculated as follows:
â€¢Maximum Capital = Account Size / 100
â€¢Trade Size = Maximum Capital / ((Entry  Stop Loss) x Point Value)

 Roundtable Knight
 Posts: 2040
 Joined: Fri Apr 25, 2003 3:33 pm
 Location: London
 Contact:
Sorry, maybe I am being dense but I can't see your problem. You can not work out the risk on a futures contract without using the point value in some shape or form. If you want to use the notional value (eg currently $88,000 on one contract of Crude) fine. But you still need the point value to get there in the first place.
1% of 88000 = 880 points, I will use the entry leve of price as a reference to determine the number of points for stop loss.AFJ Garner wrote:... If you want to use the notional value (eg currently $88,000 on one contract of Crude) fine. But you still need the point value to get there in the first place.
Do you have any suggestions on how to work out the Trade Size in term of percentage?
the leverage will change when price moves up or down, but as a simple approach I use the entry level of leverage as a reference.
Do you have any suggestions?
Thanks everyone very much for any suggestions
Do you know the link for your reference?gunter wrote:Why don't you see if you can find the original Turtle Trading rules online? There is a very good explanation of how to size positions with futures.
Another option would be Way of the Turtle which also has those same rules in it.
Thanks everyone very much for any suggestions