Advanced Position Sizing
Position sizing is the difference between amateur and professional.
Fixed Percentage Method
Position Size = (Account x Risk%) / (Entry - Stop)
Example
- Account: $10,000
- Risk: 1% = $100
- Stop: 50 pips = $50/lot
- Size = 0.2 lots
Kelly Criterion
Kelly % = W - [(1-W) / R]
- W = Win probability
- R = Win/Loss ratio
- Use half Kelly for safety
Volatility-Based Sizing
- Higher ATR = smaller position
- Lower ATR = larger position
- Normalizes risk
Portfolio Heat
- Total risk across positions
- Maximum 6% total
- Reduce for correlated trades
Pro Tips
- Never exceed 2% per trade
- Portfolio heat under 6%
- Adjust for correlation
- Smaller during drawdowns
- Size is more important than entry