Position Sizing is one of the most important aspects of trading The EdgeTrades System uses fixed fractional position sizing with a maximum of two trades open at a time. When your account grows you automatically add money to the EdgeTrades positions. When your account shrinks, you automatically use less money for your EdgeTrades positions. Position Sizing FAQs A. No. You should allocate your investment funds across 3 or 4 different approaches/strategies. Diversification is an important part of risk management. You will want to allocate only a portion of your investment account to the EdgeTrades strategy. For example, let's say you want to allocate 20% of your account to the EdgeTrades Strategy. We'll call this your EdgeTrade Funds (EF). So, if you have $100k in investment funds, you would allocate $20,000 for EdgeTrades. It is entirely up to you. Q. How many different stocks will I be trading? A. Our system trade a maximum of two stocks at a time and only selects stocks in the S&P 500. At any given time, you will have anywhere from zero to two different positions. Q. How many shares should I buy? A. You are not really trading shares, you are trading dollars. The position sizing algorithm will tell you how many shares of any given stock you should buy based on your account size and the price of the stock. That is, for a $10,000 trade, you would buy 1000 shares of a $10 stock or 100 shares of a $100 stock. A. The EdgeTrades System works best using Fixed Fractional Position Sizing. This is how it works: PositionSize = EdgeTrades Funds divided by 2
This position sizing algorithm is very important. It is one of the keys to making outstanding returns while keeping the risk under control. When the system is working well, the position size grows. When the system is not working well, it automatically reduces your position size, thereby taking less risk per trade. Key Points To Remember:
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