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Monday, February 24, 2020

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Sizing- an often over-looked variable

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 Lee M. Spano, Private Investor & Creatness CEO

 Wednesday, June 19, 2013

Position sizing is often overlooked in many trading or investing plans. Too many people fail to understand that it is a key part of solid risk management. The common formula is Position Size (PS) = Maximum Capital Risk (MCR) / Trade Risk (TR). MCR is usually in the range of 2-5% depending on the system, and TR risk is usually defined as your quantified risk for the particular trade/investment- often simply the stop loss distance. When you have a disciplined approach to position sizing linked to solid risk management, then you can readily compound profits through re-investing over the long term. That is, as your plan or system proves itself and you re-invest profits, then the MCR amount increases, and so you can increase your position sizes. Kind regards Lee M. Spano, Private Investor, Creatness CEO Further insights and resources at www.creatness.com


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5 comments on article "Sizing- an often over-looked variable"

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 Robert Woolfson, Data Scientist at Wix.com

 Sunday, June 23, 2013



@Marc I completely agree. I assume you also take into account spread and commissions when you do this.

It can be extremely disappointing to see what looks like a great strategy be completely destroyed by adding in slippage or charges.


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 Marc Verleysen, founder at TSA-Europe -systematic trading

 Sunday, June 23, 2013



@ robert

as we mostly trade with limit orders, spreads are of a lesser importance. besides, in fx spreads are extremely tight on ECN's. With the right broker, charges are very low compared to futures.

And, yes, we did throw out some great looking strategies (before costs). You know, when the equity curve looks too good to be true ....


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 Robert Woolfson, Data Scientist at Wix.com

 Sunday, June 23, 2013



@Marc, if you use limit orders spreads and slippage too shouldn't be relevant. There is not slippage on a limit order the problem you have there is not getting fully filled.

If your position only gets half filled then you only make half the profit. Unless your limits go in above the market and then you guarantee you worst price which have built in slippage


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 Larry Kase, Financial Analyst and Hedge Fund Principal

 Sunday, June 23, 2013



Amen, size is an integral component of risk management. If size is ignored risk is unbalanced despite the most rigorous price discipline.


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 Christopher Reeves, Programmer at A2X Capital

 Monday, July 8, 2013



I always use a fixed position size as well, all of the stocks I would consider trading have sufficient liquidity as well.

There is no slippage if you use an immediate or cancel order or when taking liquidity.

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