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Designing Stock Market Trading Systems: With and without soft computing by Tobias Hahn, Bruce Vanstone

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Chapter 8 – Position Sizing

“The race is not always to the swift, nor the battle to the strong – but that’s the way to bet.”

Damon Runyon

8.1 Introduction

Position sizing, or money management, is the key to generating returns. Position sizing is the process of determining how much capital should be employed on each trade. There are a number of important factors that need to be considered when making this choice.

The amount of capital risked per trade will directly impact the final system returns. Poor use of capital will result in reduced (or even negative) returns. As every trading system is different, it is worth considering exactly what you are trying to achieve when deciding on which position sizing technique is best for your system. ...

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