Fixed Fractional Position Sizing

Fixed fractional position sizing is a capital management method that determines trading position size based on account risk percentage. This method calculates the risk amount for each trade and converts it into the corresponding position size.

Calculation Principle

Fixed fractional position sizing calculates position size using the following formula:

Position Size = (Account Equity × Risk Percentage) / (ATR × ATR Multiplier)

Where:

  • Account Equity: Account equity
  • Risk Percentage: Risk percentage (default 2%)
  • ATR: Average True Range
  • ATR Multiplier: ATR multiplier (default 2)

Parameter Description

  • atr_timeperiod: ATR calculation period, default 14 days
  • risk_percentage: Risk percentage per trade, default 0.02 (2%)
  • atr_multiplier: ATR multiplier, used to adjust risk exposure, default 2

Usage Recommendations

  1. It is recommended to set the risk percentage between 1% and 3%
  2. The ATR period can be adjusted according to the trading cycle
  3. The ATR multiplier can be adjusted according to market volatility
  4. Regularly evaluate and adjust parameters
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