Sizing for a challenge
Work backwards from the loss limits to a risk per trade that survives a bad streak.
Challenges are lost to loss limits far more often than to missed targets. Size every trade so that a normal losing streak cannot get near the limits.
Work backwards
- Daily limit 5%: at 1% risk, you would need five full losses in one day to fail.
- Maximum loss 10%: at 0.5% risk, you could survive twenty losses in a row.
- Most traders who pass risk 0.5% to 1% per trade.
Do not rush the target
Most challenges now give you unlimited time. Larger size to finish faster raises the chance of a breach much more than it raises the chance of passing.
Run your strategy in the Backtest lab at challenge risk first. If the backtest's deepest drawdown is close to the firm's limit, size down.