Calculating Position Size

Discussion in 'Strategy Development' started by Champion, Dec 11, 2005.

  1. In index futures does this subject get the attention it deserves?How is position size handled? Is it all in at the entry trade? Should you instead at entry scale in?

    In YM I enter the trade always with ammunition to scale. If if whips off in the predicted direction without a counter move, I eventually take profit on my original entry position? If there is a countermove first, I will enter again at a calculated spot below my buy entry or above my sell entry.

    If it is YM or ES or another e-mini, how do you position size?
    I'm not asking what are the actual number of lots you do because that may be part of your system. What is the ratio? Do you do your position size only at entry? Do you spread your position size at entry? If you buy do you add by scaling up or down depending how price initially moves?

    When exiting do you scale out or do you take all out on target move achieved?
  2. I haven't had a response. Is that because most members don't trade or is it because position size calculations are confidential?
    Just trying to open discussion. I don't have a view to push on anyone.
  3. In the simplest way, set a margin level and divide the balance by that margin. The margin doesn't change regardless of the balance. That's called fixed ratio.
  4. on average well known systematic trend following hedge funds run leverage of 5 to 6, i.e. if you have $1m, you can take notional exposure of $5m to $6m.

    This amount of leverage is usually diversified among different markets. If you trade inversely correlated futures you can employ more leverage. You should run some VAR measures to determine your leverage.

    Assuming you have $1m and want to have notional exposure of $5m for instance and you only trade e-minis, you know the value of one e-mini is $50 times the futures contract, so 1271x$50=$63550, then you can trade 1m/63550 onctracts, i.e around 15 e-minis.
  5. 15 eminis with 1 million

    hedging should be done with at least 3x capital since most betas are 3x

    lol :)
  6. I don't get your point
  7. tomcole


    Only suckers scale down