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Having implemented position-sizing ideas like fixed-fractional, what tools does TRADING RECIPES provide to further fine-tune risk?

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Having implemented position-sizing ideas like fixed-fractional, what tools does TRADING RECIPES provide to further fine-tune risk?

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Traders use TRADING RECIPES to carefully control their risk. One limitation of fixed fractional methods for bet sizing will be seen when markets start to move as sectors. What happens is that as your system adds more and more positions in a (hot) sector, your portfolio becomes overbalanced with sector risk. You could conceivably end up with a highly correlated portfolio consisting of, say, all grain commodities or biotech stocks. If that sector turns against you drawdowns can be severe. A simple way to control sector risk is to incorporate an additional bet sizing rule, using the GROUPRISK directive, to risk no more than some threshold percentage of your equity in any one sector. Another problem with the fixed fractional method occurs during times of great activity in a broad range of markets. In this case, particularly if your system trades actively in many markets, you end up with too many 2% risk trades. Your total portfolio risk could easily be over 100% of your equity. You can’t a

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