Fixed Fractional by Price - Money Management Strategy

The Fixed Fractional by Price strategy calculates a predetermined percent of the portfolio equity and uses it to enter a position based on the price of the instrument. The parameters that are used to determine the amount of portfolio equity to be risked, the number of contracts or shares to trade and the Maximum Number of Contracts that can be purchased.

• The percent risk is the percent of the total portfolio equity expressed in the selected currency that is available to invest in a trade.
• The Maximum Number of Contracts is the maximum number of contracts or shares that can be bought (or sold) on any trade.

Example

If we are trading the Goldman Sachs stock (each point is worth $1, stock price $120), the equity is $100,000 and the percent risk per is 5% then the number of shares purchased is 100,000*0.05/120 = 41. Assuming 41 is smaller than Maximum Number of Contracts/Shares, 41 shares will be used in this trade as this position size.