Position Sizing Strategies for Algorithmic Traders
Position sizing determines whether your algorithmic trading account thrives or collapses. Learn fixed percentage, volatility-based, and Kelly Criterion...
Position sizing determines whether your algorithmic trading account thrives or collapses. It's early morning, and your algorithm just captured a move on ES futures while you were asleep. But would it have survived the 2024 market flash crash if your trade size wasn't calibrated properly? The gap between consistent profitability and account destruction often comes down to one overlooked factor: how much capital you allocate per trade. Position Sizing is the systematic method of determining how much capital to commit to each trade based on exposure parameters, volatility, and market conditions. It's the critical bridge between your trading strategy and actual capital deployment, shaping whether you'll still be active in the markets five years from now. Risk Management Algo Trading isn't about discovering the perfect entry signal — it's about ensuring you remain in the game when that signal appears. As Jack Schwager documented in Market Wizards, the traders who survived decades in the markets all shared one trait: disciplined capital allocation. The strategy itself matters less than how you apply it to your equity.