How To Calculate Your Allocation Numbers
Every one's account sizes and circumstances are different. The following are the default methods that Trendy Trading members use to stay consistent and accurate with their position sizing. You can use these as a baseline for your own trading.
Correct allocation and position sizing is the key to staying calm and carefree in any trade. As you begin to trust the process, you'll see that your wins will greatly outweigh your losses - and your profit factor will rise, too.
In a Trending Market
Full Position SizeFull Position Size means your max loss is between 1% and 2% of your total account size
Trader 1: $10,000 account size x 2% = they will lose $200 if they're stopped out
Trader 2: $28,000 account size x 1% = they will lose $280 if they're stopped out
Starter SizeStarter Size means you are front-running/forecasting what might happen, but there is no confirmation for an entry. If the trade ultimately fails, you will lose much less than you're full position size risk. If the trade ultimately succeeds, you can add up to your full position size upon confirmation, but your cost average will be better. For most people a Starter Size is between 10% - 50% of their full position size max loss.
Trader 1: $200 max loss x 50% = $100 loss on Starter Position stop order
Trader 2: $280 max loss x 30% = $84 loss on Starter Position stop order
On each trade, work backwards from where your stop is place (your risk amount) and enter with the correct size so that if you're stopped you will only lose your max loss on a full size position or your starter size loss on a starter position.
In a Choppy Market
Full Position SizeReduce your full size by one half.
Trader 1: ($10,000 account size x 2%) / 2 = they will lose $100 if stopped out
Trader 2: ($28,000 account size x 1%) / 2 = they will lose $140 if stopped out
Starter SizeFollow the same rules as in a Trending Market, but now based on your Choppy Market Full Position Size allocation amount.
Spend some time to calculate your baseline allocation numbers.
Write the numbers down and size each trade accordingly to stay consistent.