Percent of equity position sizing normalizes catastrophic risk across all positions which means you never really have to fret way too much about getting harm by an extreme adverse event in one stock.

This method is conservative simply because you could execute more than ten trades (compared for the previous method) and thus distribute risk.


What drives the very major R-many losses in many cases is a really tight stop-loss. If you’re using a tight stop-loss and you receive a spot down or a gap against your position, you operate the risk of getting huge R-several losses.

The fact is, a -5 R-several trade that existed previously could come back and Chunk you while in the future. Make sure that the risk-per-trade you take on takes into account the worst trade in your backtest.

Great question – Yes absolutely stop loss width is usually a ‘rule’ in your system like any other and you can very the value for that width in the initial stop loss to find the best values to the system. Your stop loss might be a percentage based stop, in which case you may start at say five% and increase it to 50% in steps of 5% to find out how the system performs as you widen the stop.


Position Sizing Example Using correct position sizing requires weighing three different factors to determine the best course of action:

If I have made a loss then wait until I make up for that loss before increasing the size again. This suits me and makes trading a different system less ‘Frightening’.

Some charge an hourly price with the services they supply and others offer a flat fee for the specific service. Sometimes firms or advisors offer a handful of rate options. Don’t be afraid to ask any advisor what they charge and compare their fees to others before moving forward.

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Loads of authors and educators out there talk about the 2% rule and the reason people talk about risking no more than two% is not that it’s the right amount across the board for everyone.


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