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PositionSizer for ninjatrader

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Market Wizard
Berlin, Europe
Trading Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker/Data: Interactive Brokers
Favorite Futures: Keyboard
Fat Tails's Avatar
Posts: 9,798 since Mar 2010
Thanks: 4,236 given, 26,397 received

trendisyourfriend View Post
I did a similar tool to what you did but more advanced in Excel for the Forex market many moons ago but never used it for the Futures market. In my approach, volatility does not affect my stop loss. Most of my trades are placed "on the edge" on a pullback or small retrace. My stop loss almost never varies. For the RUSSELL the average is 6 ticks with some fluctuation of around +4 ticks. That's about the same thing with the ES. I do not trade anything else. I personally use 1 contract by chunk of $3500USD. That's as you say simple and straightforward. The difference in exchange rates does not affect me as there are so small. As i wrote previously, if we could use fractional lot size as we can in the Forex market it would be another story but that's not the case.

Your spreadsheet design is superior, but you have not integrated the idea that the money management stop-loss is linked to volatility. When trading on margin - as opposed to trading stocks - both profits and risk depend on leverage.

In my opinion, the best way to control leverage is a three-step-process. In a first step you adjust the stop-loss to the volatility of your investment. I just used the average true range of a 5 min chart. In the second step you determine the number of contracts to trade. Both steps together are nothing than fine-tuning leverage.

The third step, and this is really advanced money management, is to adjust leverage to the expectancy and the risk of ruin of your setups. This is something I am not mastering now, but I am eager to learn that. Currently reading the book by Ralph Vince on Money Management. Until I understand more, I will stay with my rule of thumb, which is 1% of equity risked per trade.

Last edited by Fat Tails; October 17th, 2010 at 06:17 PM.
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