POLL: What is Your Position Sizing Method???

[rcanfiel]

Thought it would be interesting to determine what the PRIMARY method of Position Sizing that ET Traders follows?

 

[rcanfiel]

Quote from Stealth Traitor:

It's not your position size, it's how you use it.

st

Position size technique is a piece of trading. Leverage factor is a piece. Diversification, instrument choice(s), trading method/edge, broker, day/swing/positional trading, philosophy (TA, FA, price action), etc. are all separate pieces.

 

[Cutten]

None of the above. I alter my size according to my perception of the risk/reward, win rate and trade expectation.

 

[osorico]

Quote from Cutten:

None of the above. I alter my size according to my perception of the risk/reward, win rate and trade expectation.

Same here. And I'll add market conditions, news and/or events, time of day, and personal mental and physical state.

 

[jack hershey]

Market pace which determines capacity.

 

[ess1096]

It would depend on how long you are holding, day trade, swing etc.. I would scalp a much larger position than I would swing.

For swing or position trades I use the daily ATR to determine my position size.

(1% x Cap) / ATR = size

Stop = (2 x ATR)

I stole this idea from the Turtles and it works for me.

NOT these Turtles....

 

[rcanfiel]

Quote from ess1096:

"(1% x Cap) / ATR = size"

Somehow, that seems a hell of a small number???

So if you have $10,000 trading capital and ATR=3, you only trade:

$(1%*10,000)/3 = $100/3 = $33 ???

 

[Don Bright]

Trade small enough that you're not trading scared money, build up consistency in your trading strategies, turn up share size until you lose your comfort level.

You have to consider the stock's liquidity, the stock's volatility, etc. as well.

All these arbitrary mathematical methodologies to try to determine what "risk" is or what "probabilities" are don't seem to apply more often than not.

I'm certainly not bashing those who have this comfort level when using such things, I just don't see many traders making this too complicated.

This may be of interest, something I wrote a while back.

http://www.stocktrading.com/riskreward2.html

Don

 

[ess1096]

Quote from rcanfiel:

Somehow, that seems a hell of a small number???

So if you have $10,000 trading capital and ATR=3, you only trade:

$(1%*10,000)/3 = $100/3 = $33 ???

Not $33

33 SHARES

Stop being (2 x ATR) in your example it would be $6 from entry point. This equals 2% of capital (~$200) + commision and slippage.

If it seems too small it's because the account size is too small.
The risk is adjusted to the account size. If your account is only $10,000 you can use this risk method with very liquid options as long as your charting software plots the ATR of the option.

Second option is just put the whole 10 grand into one position and Hope and Pray. I like my way better.

 

[rcanfiel]

Quote from Don Bright:

Trade small enough that you're not trading scared money, build up consistency in your trading strategies, turn up share size until you lose your comfort level.

You have to consider the stock's liquidity, the stock's volatility, etc. as well.

All these arbitrary mathematical methodologies to try to determine what "risk" is or what "probabilities" are don't seem to apply more often than not.

I'm certainly not bashing those who have this comfort level when using such things, I just don't see many traders making this too complicated.

This may be of interest, something I wrote a while back.

http://www.stocktrading.com/riskreward2.html

Don

More often then not, they are used to demonstrate how to allow one to retire in a year from trading a $5,000 account.

At best, they give you an optimal reinvestment path. But a lot of bad things happen on the yellow brick road. If you ignore the Risk of Ruin and the other wicked witches, then you might find Oz...