Dynamic Position Sizer

Most traders risk 0.5% to 2% per trade. Start with 0.5-1% while learning. Never exceed 2% unless very experienced. At 1% risk, 10 consecutive losses only costs 10% - survivable. At 10% risk, 10 losses wipes you out.

No - use the same RISK per trade, not the same SIZE. Size varies based on stop distance. Tight stop = more shares. Wide stop = fewer shares. This keeps your dollar risk consistent regardless of entry/stop configuration.

Never exceed what you can afford. If calculated size is 500 shares but you can only afford 300, buy 300. This means you're risking less than your target %, which is fine. Never use margin to buy more than calculated.

Same method - 1% of $5,000 = $50 risk per trade. May only be able to buy a few shares of expensive stocks. Consider focusing on lower-priced stocks or fractional shares. Don't break rules to take bigger positions.

Common guideline: no single position more than 10-20% of portfolio. This prevents one stock from dominating your results. Even if calculated size is larger, cap at maximum. Concentration increases risk.

Use ATR to set stop: Stop = Entry - (N × ATR), typically N=2. Then: Size = Dollar Risk / (N × ATR). Example: Entry $50, ATR $1.50, 2×ATR stop at $47. Risk $500: Size = $500 / $3 = 167 shares.

Portfolio heat = sum of risk across all open positions. If 5 positions at 1% each, heat = 5%. Limit heat to 6-10% total. When approaching limit, reduce new position sizes or wait for existing trades to close.

Kelly = W - [(1-W)/R] where W = win rate, R = win/loss ratio. Calculate from your actual results. Full Kelly is aggressive; use 1/4 to 1/2 Kelly. Example: 55% win rate, 1.5:1 ratio = 25% Kelly. Quarter Kelly = 6.25% risk.

Your size automatically increases as account grows (1% of larger account = more dollars). Don't artificially increase percentage risk. Some traders add 'conviction' scaling, but keep within risk limits even when confident.

Two methods: 1) Premium risk: Only spend what you're willing to lose entirely (e.g., 1% of account on premium). 2) Delta-adjusted: Convert to equivalent shares using delta. Contracts = Target Shares / (Delta × 100).

Calculate position volatility (historical or implied). Size = (Target Vol / Position Vol) × Base Size. If targeting 15% annual vol and position has 30% vol, use 50% of base size. Rebalance as volatilities change.

Kelly uses win rate and average win/loss. Optimal f uses actual trade distribution to find fraction maximizing geometric growth. Optimal f is more accurate but requires more data. Both are aggressive; use fractional versions.

Components: 1) Account data input, 2) Market data (prices, ATR), 3) Base size calculation, 4) Volatility adjustment, 5) Correlation check against portfolio, 6) Limit validation, 7) Output final size with risk metrics.

Implement drawdown scaling: 0-5% DD = 100% size, 5-10% = 75%, 10-15% = 50%, 15%+ = 25% or pause. This preserves capital and reduces psychological pressure. Reverse scaling as equity recovers.

Calculate correlation of new position with existing portfolio (or average with major positions). Discount size: Adjusted Size = Base Size × (1 - Correlation). High correlation (0.8) = 20% size reduction. Prevents hidden concentration.