StockFetcher Forums · Filter Exchange · Position sizing<< >>Post Follow-up
135 posts
msg #101424
Ignore calhawk01
7/3/2011 9:19:57 PM


Can someone share or link a study that specifically talks about position sizing. I have tried searching but I keep getting a generalized answer, "risk X% that you are willing to risk from your capital."

For example, if you have a 100k account, and you are willing to risk 2%. Then your position size will be $2000/ price per share.

I have a big problem with this method because, if you are backtesting and looking at huge amount of data, this method fails to work because at some point, your capital becomes so large that 2% of your capital results in more than 1% of average volume of the underlying stock you are trading. Once you are buying more than 1% of daily volume.. your backtesting results become irrelevant, because most likely:
1) your order will not be executed
2) you will be affecting the price
My strategy relies on being able to go in and out of a stock without being noticed. My goal is to maximize the # of shares i can buy without being noticed. I don't want to risk more than 5% of my capital. And i dont want to buy more than 1% of daily volume.

SO my question is, do you guys prefer fixed amount of shares for position sizing. For example, if you have 7000 trades, each and every single stock gets equal position size.. 500 shares each stock. Or do you prefer a more dynamic way of position sizing which is calculated by looking at your capital and in addition looks at the average volume of the underlying security.

3,316 posts
msg #101430
Ignore four
7/4/2011 12:11:33 AM

something to view...



This link appears on the above ,

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4,577 posts
msg #101518
Ignore Eman93
7/8/2011 11:28:52 PM

well you not really risking the 2% unless you buying options and are willing to loose all 20k on a trade.

So your stop loss is 2% or 10% on each trade.. that is what you have at risk.. so if you risk 0.50 and you make 1.00 on the trade you made a 100% gain... IMHO. the full capital is not at risk. unless you wait for it to go positive and never sell a loser..

When the odds are more in your favor.. you could go larger.

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