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Calculation of the Position Size for Automatic Systems
FxRunner Posted 31 Mar. in #Amount #Position Size #Automatic25/40
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The idea is to give as risk a maximum of x% of the account peak measured during a specified period in the past (y hours). This could be for example 5% on the account peak of the last 24 hours. Then, on the basis of this “available risk” (in the following: „avRiskTot" ) and the currently open risk, the position sizes are determined for new positions. Each one gets as new risk a fixed percentage z of the avRiskTot reduced by the already open risk, e.g. 10%. “Risk” always means the loss measured in the account currency, which incurs when the price moves from the current price to the stoploss price which means in case of long positions that it falls and in case of short positions that it rises to the stoploss.
This calculation of the position size has the effect that during winning periods more and larger positions are opened and during loss-making periods the positions are slowed down or even stopped: If in the example above the account is at the maximum level of the last 24 hours, there are 5% of the account balance available for risk. If it has lost 3% from the maximum level, there are only 2% available for risk. If 5% are lost, for the time being no trading is possible. It restarts…
This calculation of the position size has the effect that during winning periods more and larger positions are opened and during loss-making periods the positions are slowed down or even stopped: If in the example above the account is at the maximum level of the last 24 hours, there are 5% of the account balance available for risk. If it has lost 3% from the maximum level, there are only 2% available for risk. If 5% are lost, for the time being no trading is possible. It restarts…
