One approach would be to multiply your maximum postion risk
(say, 1%) by your account balance (say, $100K) and then divide the
product by the largest historical system loss (say 11%). This
would yield a maximum position size of $9,091. To adjust to account
book changes, Richard Dennis had the Turtles reduce their
trading size by 20% if their account balance lost 10% until the
account recovered. Others believe you should also reduce your
position size after particularly successful periods as well to
avoid the temptations of hubris.
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Position sizing
EOD system position size
Posted by pdquig on 27th of Apr 2009 at 11:05 am
One approach would be to multiply your maximum postion risk (say, 1%) by your account balance (say, $100K) and then divide the product by the largest historical system loss (say 11%). This would yield a maximum position size of $9,091. To adjust to account book changes, Richard Dennis had the Turtles reduce their trading size by 20% if their account balance lost 10% until the account recovered. Others believe you should also reduce your position size after particularly successful periods as well to avoid the temptations of hubris.