It's taking forever for me to finish! Been busy so busy sorry.

Now that we've talked about terminology that we'll be using. Let's discuss the different methods for "position sizing".

1. Manual
   This is for overriding common sense and arbitrarily placing a manual entry of position size such as 1.0, 20.0, 50.0 lots, etc…
2. Fixed Units Multiple (units per fixed amount of money)
   Position size = (Equity / Fixed Equity Multiple; Rounded Down) * Manual Lots (the # of lots you want to trade per x amount of capital)
3. Percent of Margin
   Position size = (Available Margin * Max Risk Exposure) * Risk per Trade
4. Percent Volatility
   Position size = ((Equity * Max Risk Exposure) * Risk per Trade)) / ((VOL * VOL X) * Symbol Point Value))
   This a volatility based position sizing, reducing your risk when volatility is high and increasing when it's more steady.
5. Percent Risk
   Position size = (Equity * Max Risk Exposure) * Risk per Trade (%...like 2% is normal)

The above represent 5 methods of sizing your position. Combine this with your chosen equity model and you now have a money management strategy that you can use in your trading.

At this pace, the 3/3 of post will happen in 2 months lol. Seriously I'll try to get to it this weekend. I will be putting it all together.

So we will have an example of equity model, position sizing and strategy results comparison so you can see how simply changing your money management strategy can improve your trading dramatically.

Ciao!

__________________
-David T-
Verbtheory Trading Journal
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When time is short, timing is everything.
In such an environment, technical analysis comes into it's own.