Unit Per Fixed Amount Technique

Unit Per Fixed Amount Technique

The easiest ways in which you can size the positions in the market is by using the unit per fixed amount method, by using percentage margin or in terms of a percentage of the volatility.

When you use this technique to size the position you need to know that the method can be used for all the asset classes and is also independent of the time frame that you choose to trade on. You could also use this method on stocks, futures, currency or commodities. Be it intraday, swing or a positional trade the method works well on all the time frames.

Check this out to know how to size the positions to do proper risk management on every trade that you take.

 

Use trading system

You could use some trading system or trading tools to time the entry and exit in the market. This could be a simple moving average crossover to identify what the entry and the exit in the trade are. Using the moving average you can decide what the entry and the exit of your trade will be and this will let you calculate the profits that the trade will generate.

Trading using a moving average tool

Suppose that you are using moving averages to trade in the market. You buy on a crossover. So you look for the crossover signals and when you see one you take a trade.

You can also use ways to define the equity and the position sizing when you use the techniques. For the same signal that moving average crossover generates you can deploy your cash in various ways. The profit and loss that the trade will generate will be different for each method of deploying the cash, even though the tools that you use and the signal that you see is the same.

Stick to a method to estimate the equity and to size the position. Too many methods will only make it complicated for you.

The unit per fixed amount

This is a model to size your trading position. This is simple. This model wants you to calculate how may stocks or future lots that you will be trading for a given amount of capital. This method is not at all complicated.

However, suppose that you want to take two separate trades then this method will give them the same weight to both the trades. This will not take into account the factor of risk.

 

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