Professional-grade sizing with ATR, Kelly Criterion & Portfolio Rules
💡 Why ATR? Average True Range measures market volatility. In high volatility, take smaller positions. In low volatility, you can size up safely.
💡 Kelly Formula: Optimal bet size based on your actual win rate and average gains/losses. Most pros use "Fractional Kelly" (25-50%) to reduce volatility.
💡 Professional Guidelines: Max 10-12% per stock, 20-25% per sector, maintain 5-10% cash reserve.
⚠️ Warning: Leverage amplifies both gains AND losses. A 100:1 leverage means 1% move = 100% of margin.
ATR (Average True Range) measures market volatility over a period, typically 14 days.
Position Size = Risk Amount ÷ (ATR × Multiplier)
Optimal bet sizing based on your proven win rate and risk-reward ratio.
f* = (W × R - L) ÷ R
Where W = Win Rate, L = Loss Rate (1-W), R = Avg Win / Avg Loss
⚠️ Always use Fractional Kelly (25-50%) to reduce volatility and drawdowns!
| Single Stock/Asset | Max 10-12% |
| Single Sector | Max 20-25% |
| Cash Reserve | Min 5-10% |
| Correlated Assets | Reduce by 25-50% |
ATR (Average True Range) is available on any charting platform like TradingView. Add the "ATR" indicator with 14-period setting. The value shows average daily price movement.
No! Full Kelly is mathematically optimal but causes extreme volatility. Use 25-50% "Fractional Kelly" for smoother equity curves and smaller drawdowns.
Leverage multiplies both gains AND losses. With 10:1 leverage, a 1% adverse move costs 10% of your margin. Always reduce position sizes proportionally when using leverage.
Most professionals use 15-20% max drawdown. When hit, reduce position sizes by 50% and review your strategy. A 50% drawdown requires 100% gain to recover!