5 Answers
<p id="isPasted">Fixed Units Technique is one of best sizing technique.</p><p>In the fixed units technique, the number of lots/shares for each trade you take will remain constant. For example, if you have an initial capital of $10,000, and you decide to trade 100 units of the asset for each and every trade irrespective of the change in the total amount of capital, you are implementing the fixed units technique.</p>
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<p><br>Fixed fraction allows managing for the risk in trade size. You adjust the account size calculated in the fixed percentage technique, for the risk of loss, by dividing the account size calculated with the risk you expect to take per trade.</p>
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<p><br>Ralph Vince, a famous technical analyst, came up with a new money management technique called optimal f. Optimal f involves testing various position sizes on ‘n’ past returns from a strategy and choosing the bet size that gives the maximum amount of profit for those sets of returns. You can learn more about this in the position sizing course on quantra.</p>
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<p id="isPasted">When you deploy a percentage of your total capital into a trade, you are using the fixed percentage method of position sizing. So, when your account value is $10,000 and you use 60% of your account value to trade, you will use $6,000. When the account value changes to $8,000 or $12,000, you will use $4,800 and $7,200 respectively for the trade.</p><p>The benefit of this over the previous two methods is that you account for the changes in the account value, and consequently the profits and the losses incurred in the previous trades.</p>
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<p><br>The fixed sum technique is just like fixed units, but instead of the number of shares, you decide on the amount of capital for each trade that will be fixed. For example, if instead of a constant 100 units, you decide to use a constant dollar value, say, $8,000, you are implementing the fixed sum technique.</p>
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