Struggling with position sizing: Fixed R vs. fixed percentage?
Hey everyone,
I've been trying to get more consistent with my trading, and a big piece I'm wrestling with is position sizing. I've read a lot about fixed percentage risk models – like risking 1-2% of your account per trade. That makes sense on paper, but then I also hear people talk about defining risk in terms of 'R' multiples, where 'R' is your initial stop-loss amount.
My confusion comes in when trying to integrate the two. If I define my R as, say, $100 per trade, how does that dynamically adjust to my account size growing or shrinking without manually calculating the percentage? Or am I completely overthinking this and the 'fixed R' approach naturally accounts for it if you're consistently aiming for a 1-2% risk?
For those of you who use a more sophisticated sizing strategy, how do you handle this? Do you re-calculate your 'R' value daily/weekly based on your current equity, or is there a simpler way to ensure you're always risking a consistent percentage of your account while also thinking in terms of 'R' units for trade management? Any practical advice on how you apply this in real-time would be super helpful.