Position Sizer

Position Sizing - fixed fractionalEach TJS spreadsheet has a sheet called the PositionSizer. Each is based on a common Money Management style, called Fixed Fractional. The premise is that you should never place all of your money on a single trade, but rather a specific amount that allows for maintainable drawdown scenarios to occur.

Fixed Fractional trading sets limits to how many (shares, contracts, units) you can purchase, based on a percentage of your account (usually <1 to 5%).

If you deem certain strategies have a much greater edge than others – it may be ideal to increase the percentage for those, and decrease for others that are being tested or have not proven themselves in real-world trading.

Without a way to manage your risk on each trade, you risk losing everything.

Posted in: Trading Terminology (general product terms)