Thoughts on position sizing.
It seems to me that a trade system that can only generate 1 entry signal per day, with a 60% win rate, on about 4 days out of 5, and whose positions can only last 4hrs, demands a hefty stake to be at all financially interesting.
The standard advice of course is that not more than 2% of an account should be at risk on any single position. For BB trades, following the logic above, that seems to demand a pretty big account or to remain BB trading for pocket money. Fixing risk per trade is very sensible, and 2% risk per trade should ensure that a string of losers does not damage the account to a degree that you can't trade back to b/e without increased risks. So what's the likelihood of a string of losers in BB trading?
Maybe someone can work this out mathematically but I don't know how to do that. What I can do is review trade records and use the past as a guide. Going back to when I started applying a fixed points target and stop (14/02/11) rather than the depth of the BB range the system shows a performance of 39-30 (57%). Over the period, excluding holidays and no-trade days, the maximum consecutive number of stopped out trades is 4: this has occurred twice. The worst periods of 20 trades showed performances of 10-10: there have been no losing periods of 20 trades, assuming 1:1 r:r.
This finding surprises even me, I have not worked this out before. However, I feel it does help justify my raising my position size to 4-5% of account.