Hi,
I have been reading some texts about Fixed Ratio money management (Ryan Jones) but I didn't understand how to implement it in practice. I know that there is a relationship between increasing the number of contracts when the profits also increase and vice-versa (delta variable).
Let's suppose I have US$ 10,000 available in my account and I would like to buy some shares from 2 companies and risk a maximum 2% in each trade, like below:
*** Company A ***
Quantity....: 100 shares
Price.........: 50.00
Stop Loss: 49.00
Total cost ................. = 100x50.00 = 5,000.00
2% risk..................... = 10,000.00 x 0.02 = 200.00
No of shares to buy = 200.00 / 1.00 = 200 (risking a maximum 2%)
*** Company B ***
Quantity....: 50 shares
Price.........: 30.00
Stop Loss: 29.40
Total cost.................. = 50x30.00 = 1,500.00
2% risk...................... = 10,000.00 x 0.02 = 200.00
No of shares to buy = 200.00 / 0.60 = 333 (risking a maximum 2%)
Note: I'm risking 2% in each trade, but in these 2 trades I'm really risking 4% of my total account.
1- How can I find the best starting number of shares for each trade above according to my available account (10,000.00)?
Any help is welcome.
Thanks in advance
I have been reading some texts about Fixed Ratio money management (Ryan Jones) but I didn't understand how to implement it in practice. I know that there is a relationship between increasing the number of contracts when the profits also increase and vice-versa (delta variable).
Let's suppose I have US$ 10,000 available in my account and I would like to buy some shares from 2 companies and risk a maximum 2% in each trade, like below:
*** Company A ***
Quantity....: 100 shares
Price.........: 50.00
Stop Loss: 49.00
Total cost ................. = 100x50.00 = 5,000.00
2% risk..................... = 10,000.00 x 0.02 = 200.00
No of shares to buy = 200.00 / 1.00 = 200 (risking a maximum 2%)
*** Company B ***
Quantity....: 50 shares
Price.........: 30.00
Stop Loss: 29.40
Total cost.................. = 50x30.00 = 1,500.00
2% risk...................... = 10,000.00 x 0.02 = 200.00
No of shares to buy = 200.00 / 0.60 = 333 (risking a maximum 2%)
Note: I'm risking 2% in each trade, but in these 2 trades I'm really risking 4% of my total account.
1- How can I find the best starting number of shares for each trade above according to my available account (10,000.00)?
Any help is welcome.
Thanks in advance
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