Can someone give me a practical example on how to calculate the "Percent Volatility Model" for size positioning? Thanks.
Say you are trying to get into a stock at $100 and the 5 or 10 day ATR is $2, then the amount you risk per trade will have to be proportional to the ATR (or volatility). In this case after you buy the stock, you put a stoploss that is always at x times the ATR below the buy price. Say x = 10 then Stop Loss = 100 - (10*2) = $80 Per stock you are risking $20. Percent Volatility Model is just a special case of Percent Risk Model but it considers volatility for position sizing. So if you are risking 2R on your account size of $100,000 which is $2000, then you'd buy 2000/20 = 100 Shares Cheers