Now lets add some items to the programmed trading solution Many traders use a Chandelier Stop (CS) or trailing stop that is based on the volatility of the market. It has been successfully used and recommended by a number of traders, including Chuck LeBeau, for trend-following systems. The equation for the Chandelier Stop (CS) indicator in many programs is as follows: If Long: CS=HH - Factor*EMA(Range, Length) If Short: CS=LL + Factor*EMA(Range, Length) Or If Long: CS=HH - Factor*ATR(Length) If Short: CS=LL + Factor*ATR(Length) The trader decides the multiplier (Factor) for these stops. The length of the multiplier will impact on the profitability. Obviously, a larger multiplier will let larger trends develop but has the potential to leave larger profits on the table. A smaller multiplier will leave less profit on the table but increase whipsaw The traditional technique, after building this strategy, is to calculate your position size based on the X% account risk and then trade a fixed number of shares with a strategy that uses the Chandelier Stop. However, there are more profitable ways to trade by incorporating the position sizing and risk management into the program. Combining position sizing and the Chandelier Stop in to one trading program allows for much more flexibility. After some work you may even be able to perform swing trading using a reversal system and be able to: - Programmatically add profits from closed trades to new trades. This has a cumulative affect of profits making profits. - Specify an initial percentage risk depending on the traderâs business model (distinct performance characteristic). - Internally recalculate position sizing based on the level of volatility or rate that trading takes place (trade rate characteristics). - Manage trading events such as drawdowns better (performance period management). This is what I mean by driving trade management to the lowest level. Position sizing and risk management are then âinsideâ the strategy and not an after thought. Using this type of approach gives the trader a much better handle on the characteristics of a trade. You can programmatically decide what to risk based on the initial percentage risk and how trading is progressing. If volatility suddenly shoots up you automatically trade fewer shares (or it could be more). For example after the second loss in a row your program can decrease the number of shares traded so the impact of the drawdown is less. When you first program an internal position sized strategy and see the possibilities of internal control of trade management in a trading program you never go back to using external calculated position sizes. There is just no comparison in performance between these two. This is what I meant by there is no formula for position size in this method. You program the formula for position size yourself. You determine position size based on your business model and incorporate it into your type of trading.. What you have to do as trader is dig the correct position sizing out of your edge or strategy by testing, paper trading and live trading to get to the risk you can handle as part of your trading. The strategy you develop requires a position size you can live with. It has taken me years to develop functions (subprograms or subroutines) that handle my position sizing and risk profiles internally in my strategies. But Iâm no longer subjected to using linear position sizes. I can calculate a position size based on a number of factors that suits my business model, risk tolerances and how I do performance management.