Fixed Lots Vs Variable Lots

[Pi3141]

Hello,

Can anyone shed any light on which is method is better when setting lot size? I have run backtests on my systems in MT4 so that only the lot size parameter is altered (meaning in the no. of trades, no. of winners and losers is identical in both tests).

My results show that a fixed lot size outperforms a variable lot size because the profit factor and expected payoff is marginally greater and the relative drawdown is slightly lower when compared to using variable lots.

However, almost everywhere I've read online the consensus seems to be that variable lots is better and it ensures that 1% risk rule is adhered to.

Thoughts and discussion greatly appreciated.

 

[Rhody Trader]

In the end, how the system works tends to determine which is better. A system that often has strings of losses will have lower drawdowns under a variable trade size system, for example, because successive losses will be increasingly smaller. Variable trade size will also see position size grow as profits accrue, creating a compounding effect which you can't get if you have one fixed lot size.

 

[Geofract]

Personally I prefer variable lots and fixed % risk. I take comfort in the fact any given trade can only lose a fixed % amount, and that all trades are equal in monetary value.

Also, whilst I might know the long term probability of my trading style producing a winner or loser, I don't/can't know the probability of success for any individual trade.

As my trading style always requires a different sized stop for every setup, changing lot size Is ideal to keep risk consistent. If I were to have to trade with fixed lot size and variable stop size, my risk would be constantly changing. Not ideal IMHO. Why risk more on one trade than another?