StockFetcher Forums · General Discussion · Why Risk Reward Ratios Donít Work and What You Should Do Instead -- (Time Stamp 23:40)<< >>Post Follow-up
four
4,006 posts
msg #126327
Ignore four
modified
11/26/2015 12:29:18 AM

by Erich Senft
Comments on this thought?



Kevin_in_GA
4,553 posts
msg #126329
Ignore Kevin_in_GA
11/26/2015 11:40:17 AM

Some code for managing amounts at risk:

/*DETERMINE THE MAXIMUM AMOUNT YOU ARE WILLING TO LOSE*/
SET{ACCOUNTSIZE, 25000}
SET{RISKLEVEL, ACCOUNTSIZE * 0.01}

Here I have set up the code to put only 1% of your trading equity at risk on any given trade, which in this example is only $250. All you need to do is set your account size at whatever the amount is that you can currently trade using this system.

/* VAN THARP POSITION SIZING - SET THE STOP LOSS AND SHARE SIZE BASED ON LIMIT ENTRY AND AMOUNT WILLING TO LOSE*/
SET{ENTRYPRICE, xxx}
SET{2ATR, 2 * ATR(20)}
SET{STOPLOSS, ENTRYPRICE - 2ATR}

Once you have decided where your entry will be I use twice the value of the ATR(20) as the point for positioning the stop loss. Just a simple subtraction of this amount from the entry price - this should give the stock enough room to fluctuate normally without triggering the stop loss.

/*DETERMINE THE NUMBER OF SHARES TO BE PURCHASED*/
SET{SHARESTOBUY1, RISKLEVEL/2ATR}
SET{SHARESTOBUY, ROUND(SHARESTOBUY1, 0)}

Just a quick comment here - SF code does not let you do more than 1 mathematical operation in any given SET{} statement. Here I have determined the required number of shares, then used the ROUND() function to make the output a whole number for ease in placing orders. When I place my orders I usually round to the nearest 5 shares since that is easier to actually get an order filled - odd amounts like 17 are harder to get filled than 15 or 20 shares.

/*TOTAL AMOUNT OF EQUITY USED IN THIS TRADE*/
SET{POSITIONAMT, LIMITENTRY * SHARESTOBUY}

/*PERCENT OF TRADING CAPITAL USED IN THIS TRADE*/
SET{POSITIONPCT1, POSITIONAMT / ACCOUNTSIZE}
SET{POSITIONPCT, POSITIONPCT1 * 100}


StockFetcher Forums · General Discussion · Why Risk Reward Ratios Donít Work and What You Should Do Instead -- (Time Stamp 23:40)<< >>Post Follow-up

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