Position sizing

[salvador90]

Quote from sheepsucker:

I trade futures and have trouble determining a good model for position sizing.

I have read quite a lot on the subject and ran lots of simulations and am aware of the theory in the field. Kelly, Monte Carlo simulations etc.

My intention is to swing for the hills like neke.

When I am trading well I have I have RR 5 and win-% 35.
A working approach seem to be to risk 1-2% per trade, at least Monte Carlo simulations look beatiful.

If I get out of touch somehow, which happens unfortunately. I am quite quickly, after 6 losers down ca.10%.
Which can affect my trading so I get down even more.

So I have been thinking after 3 losers cut down to 1% and after 3 more losers to cut down more and even hit SIM.

Another approach I have been pondering would be using levels. example:
-start with 20k and risk max 1%
-when its at 22k increase bets to 2-3%
-if again down to 20k get back to max 1% bets

What im really thinking about is some rules to use to maximize potential but still guard for psych-issues and varying market conditions.

Thanks for any help!

Hello sheepsucker,

I do something similar, I use 1% risk and 2% depending of where my equity is regarding its moving average.

If my equity is above moving average i keep going for 2% risk, once it drops below I use 1% risk ... according to my simulations, it improved my results by a big margin.

 

[Muskoka Joe]

I have trading systems or edges if you will -- that after a winner or series of wins the historical probability of the next trade or next "N" trades being net winner(s) is still at or above the overall system average.

I also have systems that after 2 or 3 consecutive wins the probability of the next trade or next "N" trades being net winner(s) decreases below the overall system average.

Depending on your system logic there can be clear reasons why trades ARE dependant on what has preceded them.

In the two distinctly different circumstances I would look to increase position sizing in different ways. A lot of systems fall into category 2 and that is one reason some position sizing strategies will perhaps let you down.