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Saturday, May 31, 2008

Position Sizing for Breakout System

Click here to see the breakout system.

Now, the Stop Loss is simply the opposite signal. So if the long order triggered, then the Stop Loss would be the short order price, which would triggered the short order.
Everyday we'll have different range of Stop Loss. So if you want to limit your risk per trade, you will have to calculate the quantity.
After you know the high and low, and you adjust it with the spread, you can find the range,which is the Stop Loss.

Here is the example from yesterday on GBP/JPY:


Range : H - L = 72 pips
Equity : $100
Risk : 5% = $5
So, the quantity for a position with 5% risk on a 72 pips Stop Loss will be
($5/72) * Quantity Contract Size. Let say it's a mini account so it will be:
($5/72) * 10000 = 694.44 Quantity which is 0.06 Lot.

Actually it is not just for a breakout system, as long you know your stop loss. And this has nothing to do with risk-reward ratio, it is only to limit the risk. Okay hope this information is useful.. :)


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