How position sizing can affect your trading performance-
Assuming that you are trading a Trendfollowing system with Big RR and low winrate.
For example, assume that you risk one percent per trade on a 100,000 account
and you have 20 straight losses.
Assuming that you are trading a Trendfollowing system with Big RR and low winrate.
For example, assume that you risk one percent per trade on a 100,000 account
and you have 20 straight losses.
That one percent is of your remaining equity and at the end of 20 losses, you would be down to 81,790.60.
, Now if you got a 30R winner and you are risking one percent of your balance of 81,790.60, your
new equity would be 106,327.90 You’ve had 20 losses and one winner,
, Now if you got a 30R winner and you are risking one percent of your balance of 81,790.60, your
new equity would be 106,327.90 You’ve had 20 losses and one winner,
but you are still up 10R and your equity is up by 6.3R percent.But let’s say you risk five percent per trade on your balance. At the end of 20
straight losses, you would be down to 35,772.89 or down 64 percent.
straight losses, you would be down to 35,772.89 or down 64 percent.
If you risk five percent on this amount and get a 30R winner, you would be up to 89,621.48. You are up 10R, but because of your position sizing, your equity is
still down over 10 percent.
Example from book Trading beyond the matrix.
still down over 10 percent.
Example from book Trading beyond the matrix.
