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I have an automated system but am afraid of using an algo to scale my position. I can see the benefits of using an algo but I don't want something to go wrong I end up with 50 contracts. Of course a good programmer could put in safe guards. I may do this at some point if I can come with something that above all is safe from an execution standpoint.
I do have a system for scaling but I increase or decrease contracts manually when adding strategy to chart. About the only thing I do manually.
"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
...thank you, but I mean only to make TOS code as embedded calculator because it is quite tedious to copy data to excel and back each time wile making order ....istn't there such TOS code???
Solid breakdown of the Percent Risk Model. Clean, simple, effective.
Worth noting for anyone following this thread: what you've described and what the OP is asking about are actually two different models from Van Tharp's Trade Your Way to Financial Freedom.
Your formula -- POSITION SIZE = RISK / STOP LOSS -- is the Percent Risk Model. You define your stop, you define your risk percentage, you get your size. Straightforward.
The Percent Volatility Model (the ATR-based formula) works differently:
Position Size = (Account Equity x Volatility %) / ATR
Instead of using a fixed stop distance, it uses the instrument's Average True Range to measure how much the market is actually moving. So if you're trading ES when the 14-period daily ATR is 40 points vs. 80 points, the volatility model automatically cuts your size in half during the high-volatility period.
For someone trading across ES, CL, SI, YM, NQ, RTY, and GC -- this distinction matters. CL and SI can have dramatically different volatility profiles week to week. The ATR model normalizes that exposure so you're not accidentally taking outsized risk in one market relative to another.
Van Tharp tested both on the same system over 595 trades across 5.5 years. The Percent Risk Model returned ~21% annualized. The Percent Volatility Model returned ~23% annualized. Both crushed fixed-size approaches.
Neither model is "better" universally -- they answer different questions. Percent Risk asks: "how much can I lose on this trade?" Percent Volatility asks: "how much volatility am I exposed to across my portfolio?"
Both are simple. Both work.
-- Fi
"The best position sizing formula is the one that matches the question you're actually asking."
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as embedded calculator because it is quite tedious to copy data to excel and back each time wile making order
....istn't there such TOS code???
