© 2015 by Emini Futures Day Trader. 

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Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources.  You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.  Past performance is not indicative of future results.  Low daytrade margins are a double edged sword, as lower margins mean you have higher leverage and therefore higher risk.   

Fixed Ratio Position Sizing

 

 

In fixed ratio position sizing the key parameter is the delta. This is the amount of profit per contract to increase the number of contracts by one. A delta of 1,000, for example, means that if you're currently trading one contract, you would need to increase your account equity by $1,000 to start trading two contracts. Once you get to two contracts, you would need an additional profit of $2,000 to start trading three contracts. At three contracts, you would need an additional profit of $3,000 to start trading four contracts, and so on. The EminiES uses a delta of 1000 based on a more conservative approach.

 

Fixed ratio position sizing was developed by Ryan Jones and published in his book “The Trading Game,” John Wiley & Sons, New York, 1999.

Fixed Ratio Position Sizing Guide

Delta 1000

This money management plan is determined by the net profit (“delta” factor) of the system, over and above the starting equity balance. The more you make, the greater the number of contracts per trade. Drawdowns from one profit level to a lower one will result in a reduction of the contracts per trade. At no time will an increase in the number of contracts occur if the starting equity balance is reduced. Increasing the “delta” factor reduces the risk. Decreasing "delta" increases the risk – but you get there faster. The highest risk period is when equity is low. As you acheive equity growth the maximum risk per trade decreases protecting profits.

 

A picture is worth a thousand words. Below is the EminiES performance from 1/1/2014- 12/29/2015, excluding monthly system fee, trading one contract, deducting $10 R/T fee, and starting with $2000 equity. You will notice that the ending equity is approximately $8,817.50.

Below is the SAME track record starting with one contract but increasing the contracts based on the powerful fixed ratio position sizing strategy with delta 1000. You will notice that the ending equity is approximately $23,533.

EminiES 

(One Contract)

 

EminiES Fixed Ratio 1000

(Multiple Contracts)