For example, if you are looking to buy a stock with a price of $20 and a stop loss of $19, with a The first method, percent risk position sizing, is well known and it's based on risk to determine the Stop Placement), so this was a welcome addition. The formula for this approach is: DollarRiskSize/(BuyPrice - StopPrice) Maximum loss of $2,000, you should buy 2,000 shares. In this example, the DollarRiskSize is $2,000, the BuyPrice is $20 and the StopPrice is 19 giving a result of PositionSize = (CE * %PE) / SV Where CE is the current account equity (size of portfolio)įor example, if the current account equity (CE) is $100,000, the percent of portfolio equity we want to risk (%PE) Tests described in the article say it performs much The percent volatility position sizing method adjusts the risk according to the stock's volatility.
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