Trade Management
Fixed-Fractional Position Sizing
Risking a fixed percentage of current equity on every trade, so the dollar size of each bet shrinks automatically after a loss and grows automatically after a win, instead of staying flat no matter what the account has recently been through.
Race the two sizing methods through the same trades
Both accounts start at $10,000 and see the identical sequence of wins and losses. The gold line risks a percent of whatever the account is worth right now. The steel line risks a fixed dollar amount, set once at the start and never adjusted. Pick a streak scenario, set the risk percent, and press play.
Each trade is +1.5R on a win, -1R on a loss · 30 trades in the sequence
How it works
- The risk amount is recalculated before every single trade. At 8% risk, a $10,000 account risks $800 on the next trade. If that trade loses and equity drops to $9,200, the next risk amount is 8% of $9,200, which is $736, automatically smaller. Nothing has to be manually adjusted.
- Fixed-dollar sizing does the opposite on purpose: it holds the risk amount constant. That $800 risk-per-trade figure, set at the start, stays $800 whether the account is at $10,000, $6,000, or $2,000, and whether it's up or down.
- A losing streak shrinks fixed-fractional bets exactly when it should. Because each loss reduces the base the next risk is calculated from, a long losing streak decelerates on its own, position by position, without anyone deciding to cut size.
- The same streak hits fixed-dollar sizing at full force every single time. The dollar loss per trade never shrinks, so a run of losses subtracts the same chunk from a shrinking account over and over, which is what produces the gap between the two lines above.
Where this breaks
Percentage risk still compounds losses, it compounds them more slowly
Fixed-fractional sizing can't put an account at exactly zero from trading losses alone, because every loss is a percentage of whatever's left. That sounds like protection, and relative to fixed-dollar sizing it is, but it comes with its own cost: after a bad enough streak, clawing back to the starting balance requires a larger percentage gain than the percentage that was lost, the same math that makes any drawdown harder to recover from than it was to create. Set the risk percent above to 10% and run the brutal streak scenario to see how much of the account a genuinely bad run can still take, survival isn't the same thing as staying whole.