Fixed Fractional Positioning

[CanOz]

Here is a good explanation of FFR aka Fixed Risk Positioning. This is a method to help calculate how many stocks, or other instruments to buy or sell and maintain your desired level of risk per trade.

http://www.stator-afm.com/fixed-fractional-position-sizing.html

CanOz

 

[Boggo]

Here is a good explanation of FFR aka Fixed Risk Positioning. This is a method to help calculate how many stocks, or other instruments to buy or sell and maintain your desired level of risk per trade.
CanOz

CanOz

I have attached a couple of pics of the principle.

Risk is 2% (inc brokerage) of 20000, same assumed target of $4.75, same entry (buy price) but a different exit (stop).
The result is a different Risk/Reward and a different buy volume.

With the stop at $2.20 the R/R is only 2.5 (lower than I like to have) whereas stop at $2.49 R/R is very good... but, the risk of being stopped out is greater.

Just for fun which stop would you use ??

(click to enlarge)

 

[glenn_r]

Right now I would set it @ 2.61, but I would wait to enter after it breaks through 3.00 level then reassess the stop level then maybe using the trend line or recent swing low.

 

[Cartman]

Just for fun which stop would you use ??

(click to enlarge)

stop at 2.35 would be my choice ----- but totally subjective ----

with a 2 stage entry !! (initial half position size )

 

[CanOz]

Why not under the third bar back and really go for it!

I like the closes.

Cheers,


CanOz

 

[Boggo]

Right now I would set it @ 2.61, but I would wait to enter after it breaks through 3.00 level then reassess the stop level then maybe using the trend line or recent swing low.

I wouldn't wait until $3 glenn, I would be in at a break of 2.91 with a stop at 2.49, my

stop at 2.35 would be my choice ----- but totally subjective ----

with a 2 stage entry !! (initial half position size )

That is nearly 20% from entry to stop, too far for my liking Cartman.

Why not under the third bar back and really go for it!

I like the closes.

Cheers,

CanOz

I use 2.1 times ATR as a bit of a guide to give it some room to move around, 2.1 ATR is about 2.52 at the moment so my stop at 2.49 is just outside that.

It is holding up well even on down days.

Its always interesting how we all vary in these scenarios.

Cheers.

 

[weird]

I would pick closer to Glenn's and CanOz's stops @ 2.62, and I would look at 2.92 for entry (same as your pick Boggo).

If you are wrong about the trade, how long are you willing to be wrong, using a wide stop ... over 5-10 bars of more, using a daily setup ?

Opportunity cost, move on, if u want, attempt to re-enter again with a tight stop.

I notice the software MT Predictor, while I don't have or use this, I like their approach ... so go with whatever they suggest unless confident otherwise.

ATR stops are interesting for long positions during bear markets ... as stocks are much more volatile, and unless your catching a significant turn, your going to get smacked more .... F/F will probably help here more in reducing the damage than alot of other money management strats.

 

[tech/a]

I'm with Boggo's option 2
Click to enlarge.

 

[CanOz]

Why Tech? Was that a shakeout you think?

CanOz

 

[glenn_r]

I should clarify my thoughts Boggo, I'm presuming it will break through the round figure and fib level of 3.00 and retrace then I would buy the break.

I entered CAB this morning @ 6.04 with the initial stop @ 5.81 looking for 6.50 /6.99, this is a very vaguely similar setup.

The announcement that the Vic Premiers staff used over $100k on taxi's last year instead of public transport caused a bit of a spike today

 

[BentRod]

I'd wait for Glenns TL to get breached and get short from there, 4 touch is usually the kiss of death.

Stops above the previous bar or high of the day.

 

[tech/a]

Why Tech? Was that a shakeout you think?

CanOz

Break below B and the patterns wrong.
That was the initial analysis.

From a VSA view its a bit late but here is my take on it.
Note the lack of supply on the previous bar.
It may well return towards the recient high. A clear break above and its a good long trade.
Already is if you were a little earlier.
Click to expand

 

[Boggo]

I notice the software MT Predictor, while I don't have or use this, I like their approach ... so go with whatever they suggest unless confident otherwise.

With MTPredictor in this case weird I simply clicked on the entry bar, the stop bar and a target (I just picked 4.75 randomly in both to demonstrate) and the software just does the calcs and plots it, ie. its a manual selection for the discussion.

Just out of interest, for the same $ risk in on both, has anyone compared the actual total investment $ cost for the assumed trade in each case to the $ at risk.

It creates another view of the stop position does it not, another worth.

Cheers

 

[tech/a]

but, the risk of being stopped out is greater.

if you were stopped out then the analysis for this pattern would be proven incorrect.
No point hanging around until the next exit where it tells you not only was your analysis incorrect but you needed to be totally convinced.

On the flip side if the high is taken out convincingly the risk in the trade can be further deminished by setting a trailing stop at the $2.63 low.

 

[Boggo]

From a VSA view its a bit late but here is my take on it.
Note the lack of supply on the previous bar.
It may well return towards the recient high. A clear break above and its a good long trade.
Already is if you were a little earlier.
Click to expand

That is a significant bar (and low) where the VSA entry was identified, nice entry point too with a tight stop which is still intact.

if you were stopped out then the analysis for this pattern would be proven incorrect.
No point hanging around until the next exit where it tells you not only was your analysis incorrect but you needed to be totally convinced.

Agree 100%

 

[Cartman]

That is nearly 20% from entry to stop, too far for my liking Cartman.

u r dead right Boggo ---- my comment was more to point out that the $2.49 stop was too close to the previous price action ---- the trade would most likely be a fizzer unless a scaled entry was used ----

i dont do stocks, but if i did $2.49 would be a possible entry stop at $2.35 ---------

or even better still --- entry $2.20 ---- stop $2.10

 

[tech/a]

Just on IPL as a follow up.
The previous high was tested today and appears failed.
Think its due for some ranging.

 

[johnnyg]

Tech, did VSA give any hints that there was supply occurring over the last few days?

 

[BentRod]

I'd wait for Glenns TL to get breached and get short from there, 4 touch is usually the kiss of death.

Stops above the previous bar or high of the day.

Geez.....Wish I was trading stocks

 

[Boggo]

Just on IPL as a follow up.
The previous high was tested today and appears failed.
Think its due for some ranging.

Nicely picked tech/a, didn't expect that much though.