How do you adjust your position sizing for different market environments?

2 Ranging markets

A ranging market is one that moves sideways, within a defined support and resistance level, for a prolonged period of time. In a ranging market, you want to exploit the fluctuations and buy low and sell high. Therefore, you can use a smaller position size than usual, as the market is less predictable and more prone to false breakouts. For example, you can use a fraction of your account balance, such as 0.5% or 1%, or a fraction of the ATR, such as 0.5x or 1x, to determine your position size.

4 Calm markets

A calm market is one that moves slowly and steadily, with small price movements and low volatility, often due to low volume, lack of news, or market consolidation. In a calm market, you want to be patient and selective, as the market offers fewer trading opportunities and lower returns. Therefore, you can use a moderate position size than usual, or wait for a breakout or a trend reversal, as the market is more stable and easier to analyze. For example, you can use a standard percentage of your account balance, such as 1% or 2%, or a standard multiple of the ATR, such as 1x or 2x, to determine your position size.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?