Position sizing is a crucial aspect of trading that determines the percentage of your portfolio you are willing to risk for a specific trade.
On Anny's platform, you have two options for position sizing:
- Fixed investment -> invest a predetermined fixed portion of your allocation on each trade.
The risk exposure will fluctuate with every trade based on the investment recommendation.
Entry amount = investment allocation * (Investment recommendation/100)
- Fixed risk -> fix the risk by calculating the amount to invest based on the stop-loss position.
Your first consideration should be the account risk, which is a percentage of the allocated investment that you are willing to risk on the trade. Next, determine the stop-loss level for the trade, which represents the point at which you would exit the trade to limit losses.
Once you have the risk percentage and the stop-loss level, you can calculate the ideal position size using the following formula:
Step 1: Investment recommendation = (Risk percent / Stop-loss percent)
Step 2: Entry amount = Allocation * (Investment recommendation/100)
Anny performs these calculations for you, and you only need to define your desired risk percentage, while the stop-loss is taken from the signal.
For example, based on the calculation in Step 1, if your risk percentage is 2% and the stop-loss percentage indicated by the signal is 3.94%, the calculated investment recommendation would be (2 / 3.94) * 100 = 50.76%. This means you should invest 50.76% of your allocated investment for this trade.