volatility-adjusted sizing reduces risk by scaling down positions in high volatility, leading to smoother equity curves and smaller drawdowns. it lowers "equity volatility" but can limit profits during volatile periods due to smaller positions. for me, it works best in uncertain or bearish markets, while i switch to fixed sizing in trending markets to capture more profit.
2 x ATR seems a bit arbitrary, and large unless you are expecting a multiple ATR win. (That multiplied by your win rate gives a positive expected return) The ATR multiple used will really depend largely on the expected or targeted win size and the time-frame won't it?
do you see any trade-offs in terms of overall profitability or other metrics like drawdown, profit factor when compared to fixed position sizing?
volatility-adjusted sizing reduces risk by scaling down positions in high volatility, leading to smoother equity curves and smaller drawdowns. it lowers "equity volatility" but can limit profits during volatile periods due to smaller positions. for me, it works best in uncertain or bearish markets, while i switch to fixed sizing in trending markets to capture more profit.
That's a good stuff. I am almost always using volatility-adjusted pos sizing.
2 x ATR seems a bit arbitrary, and large unless you are expecting a multiple ATR win. (That multiplied by your win rate gives a positive expected return) The ATR multiple used will really depend largely on the expected or targeted win size and the time-frame won't it?