STOPS by NumaSoft - Position Sizing

Comprehensive Money Management
Software for Stocks & Futures

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Position Sizing

	Determining the number of shares or contracts to trade is the single most important concept in money management. By limiting the amount of capital risked per trade, the chance of wiping out your account from a string of losing trades is greatly reduced. Account draw-down and limited capital are inherent in trading. Successful traders know staying in the game for the long run is key to success and position sizing is fundamental to this process. STOPS utilizes proven anti-martingale position sizing, where position size increases as account size grows. Position size is calculated using maximum percent total or core equity to be risked per trade, broker commission and initial stop-loss amount. Total equity is account cash plus the value of all holdings. Core equity is total equity reduced by current account risk. For example, core equity in an account with three open positions, total account risk of 5% and total equity of $10,000 is $10,000 - ($10,000. x .05) or $9,500. Initial stop-loss is automatically calculated in STOPS using minimum reward / risk ratio, profit target and broker commission. The reward / risk ratio helps determine if the potential reward is worth the risk. Depending on the effectiveness of your system, length of trade and volatility of the market, the reward / risk ratio may vary from 1.5 to 4.0. See Exit Analysis to learn more about STOPS profit target. STOPS Position Sizing features: Total or core equity. User defined maximum percent equity to be risked per trade. User defined minimum reward / risk ratio per trade. Risk targets can be overridden on any position. Includes broker commission. Automatic rounding down to whole contracts for futures. Automatic initial stop-loss. Both long and short positions. Fully automatic with manual override. Fully integrated with all STOPS money management tools. The following example illustrates STOPS Position Sizing for a long position: Maximum percent total or core equity per trade and minimum reward / risk ratio risk targets are entered. Targets can be overridden on any position. Risk Targets used to calculate position size. In this example, 2.0% maximum total equity per trade will be risked. Initial stop-loss will be calculated using reward / risk ratio of 1.50. Per trade or per share / contract broker commissions are entered. Broker commissions are used to calculate position size. In this example, $10.00 market order commission and $15.00 limit order commission are entered. Upon opening a new position, the buy order is entered into the daily trade log. Using maximum percent equity per trade, minimum reward / risk ratio and broker commissions, the initial stop-loss sell order and position size are automatically calculated and entered into the daily trade log. Both values may be overridden. The Securities screen and Daily Trade Log track all position and order activity. (View Full-Size) In this example, a buy market order of $19.50 is entered. The $18.98 initial stop-loss and the position size of 346 shares are calculated using maximum percent equity of 2.0%, minimum reward / risk ratio of 1.50 and buy / sell order broker commissions of $10.00. The percent equity and reward / risk ratio are listed in the securities screen (under Risk % and R/R). Ordering Information Other integrated STOPS money management features: Trade Tracking Risk Control Exit Analysis System Analysis Monte Carlo Analysis Paper Trading Tax Reporting