Traders' Roundtable

Many thanks Jake for that clear explanation.

You are right that it should not matter what % of total account is invested in a stock as long as the risk is just 1% od the total account.

If I want a maximum of 20 stocks in the portfolio (which according to EMH will diversify away the specific risk ...

Could someone please explain how to convert the % volatility position sizing to fixed fractional. Someone posted that c.f. had written apaper on this but I cant seem to find it.

Risking only 1% of equity sometimes means that I have to invest over 10% in one single stock position which for me is a ...

Many thanks for the replies.

I now understand the % risk to total equity, however the amount invested in a position as a % of the total portfolio would just be too high. You need to be able to sleep at night.

If I were to run a 30 stock porfolio, I would invest 1% of the portfolio in each trade ...

Many thanks Kiwi,

I would use a 2ATR stop for each poistion.

Referring to 1%, I have read that each trade should not be more than 1% of equity, in this case £1000.

Hope this helps.

Regards,
Bunter

Assume I have two stocks and a £100,000 account.

Stock A Price 200p ATR= 10p
Stock B Price 150p ATR= 12p

Stock B is more volatile at 8% than Stock A at 5%.

Using a 1% volatility I can calculate the number of shares to buy as follows

Stock A 1% of £100,000/10p= 10,000 shares at a cost of £20 ...