Hi all,

I hope you can all please bear with me for this one, but I'm struggling to understand how to safely grow equity. Growing my equity is my objective, as my current equity and returns are too low to allow me to quit my day job. I will become more focused on steady returns when I have achieved sufficient equity to allow me to trade full time.

My discretionary trading (using manual support and resistance levels & ATR on the 1hr charts to try to sell daily tops or buy bottoms with the occasional gap play or breakout) has been profitable for almost 9 months now. I'm getting a 48% win rate with a rr of 1.3.

Every 3 months or so I have broken jcl's golden rules by

1)fully reinvesting my profits i.e. I take the current account balance at that point and use it to break rule number 2.

2) calculate my stake size (I'm a spread better) as a fixed percentage of that balance (full profits included). I do however have a view of how much I want to be in that trade mostly influenced by news and fundamentals, but also on the basis of how strong the support/resistance has been, so I risk a fixed % from .25%, to a max of 2% per trade.

I do not change the balance figure I calculate the fixed percentage from when in drawdown, so when in drawdown, the actual %equity at risk per trade would be higher than the e.g. 0.5% I am using. Also I never revise down the balance figure I calculate stake size from, e.g. if in 3 months time the equity is still in drawdown, I'll reassess in another month. I only increase the balance used to calculate stake size when the real account balance is safely above a growth milestone, I've been using 10% to date.

Drawdown can be worrysome, max drawdown to date was 29%, but this was more due to me tinkering with my entries trying to get higher win rates, but the lost risk reward outweighed all the win rate gains.

I do not doubt jcl's maths about equity growth and fixed percentages leading to margin calls eventually, but considering the step nature of what I do, does this not change things? How different is what I do from someone starting my method 3 months or a year or 5 years later simply with a higher equity? Is everyone doomed mathematically to a margin call? and the higher the starting equity, the sooner it would happen?

Clearly I'm not a mathematician, because there is surely some flaw in the above logic, that does however leave me with the problem of how to grow my equity with a profitable method.

A) If at the next step change, instead of using the new balance figure including full profits, I calculate a new lower balance based on the square root of the profits in the last period, will that remove my mathematical certainty of margin call?

B) Or do I need to adjust it further down to account for the square root of all profits to date and not just in the last period?

C) Does the math tell us anything about how frequently we can safely add on even the square root of profits? per trade, per day, per month, per year, or does it not matter? I know that the frequency of compounding of interest matters.

D) Even if I get a safe method of using a balance, is my method of fixed percentages of any figure dooming me to a margin call?

E) Finally, I'm testing the z strategies at the moment, can anyone explain to me - clearly I'll require an idiots guide - how to use the z strategies sliders to safely grow equity by reinvesting profits? How much and how frequently is it safe to do so consistent either with reliable steady income or with equity growth, but preferably both?


Thanks to anyone who can help me out with this, hope it is in the most appropriate forum.