From a Nithin Kamath interview with Jack Schwager: NK: Do you still believe you shouldn’t take more than a 1% risk on a trade? JS: I think it was in New Markets Wizards that I said you should limit your risks to a very small level. I might have said about 1% or 2% or less. Now I feel it should be 1% maximum and ideally half a percent or less. So yes, I believe if you want to succeed, your loss on each trade should be limited to about 1% of your total equity, or less. Too many people think "oh, 5% is not a big deal". Well, a few 5% losses and you're out of the game. NK: Nevertheless some traders succeed without rigorous risk-management rules. JS: That’s because their ability to identify value stocks and hold those positions was good enough for them to realise extremely good gains with acceptable draw downs. Martin Taylor, who at the time I interviewed him, I think it was 2011, was down about 14% to 15% and the position causing most of the loss was Apple. And yet, I'd never seen anybo...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.