John is an aggressive trader, who specializes in directional aggressive plays with the overall goal of growing his account, while also creating a constant income stream. This trading style guides him when he decides which strategies to use on the setups he finds. What kind of trader are you? John’s aggression level in any singular trade is determined by his technical analysis, perceived level of strength of the setup, overall market conditions, risk allowed per trade relative to his overall account size, and his account growth goals. These are all important considerations when deciding which setups fit your own risk parameters.
Don’t forget – the relative risk of a strategy is also coupled with the position size you use when you place it, which should also reflect appropriately on your account size.
Risk Management at a Glance
Trading Style: Aggressive Swing Trader – Directional + Income
Account Goals: To achieve aggressive growth, John targets a 120% gain on his account per year. He breaks this down to a 2.3% growth per week, adjusting risk and position size each week for account size. His primary goal is identifying high probability moments in time where he can leverage options in a way to significantly grow his account while also paying himself on a regular basis.
Overall Acceptable/Recommended Account Risk: John has the following recommendations for position sizing:
- New/conservative traders – don’t risk more than 1-2% of their account per trade
- Intermediate/conservative traders don’t risk more than 2.5% per trade
- Experienced/aggressive traders never allocate more than 5% of your account on any one trade.
- For all traders, he recommends that you don’t have more than 20% of their account at risk at any given time, which means sitting largely in cash.
- Don’t have more positions than you can realistically handle.
- His personal preference is trade the positions he has well rather than spread himself thin on a large variety of setups. John prefers not to have more than about 8 positions at a time. “The jack of all trades is the master of none.”
Please note that he does break his own risk parameters from time to time to achieve aggressive account growth, but he does not recommend that others do that.
Strategy Use + Risk Taken Per Setup: Position size & strategy utilized per trade dependent on perceived strength of setup, while keeping risk parameters in mind. (And yes, sometimes he breaks his own rules – that doesn’t mean you should).
Methodology: John likes to spread his risk around when it comes to lower probability plays, gaining income while waiting for the stars to align so he can pounce on his favorite and highest probability setups. You’ve probably seen him throw on a 100 lot – that’s him pouncing!