Position Sizing & Risk Management
Position sizing is the most underrated skill in trading. Most retail traders spend 90% of their time finding entries and 0% of their time on position size. This is why most retail traders eventually blow their accounts — not because their entries are wrong, but because when they're wrong, they've risked too much.
Murray Money Pro removes this problem by embedding position sizing directly into every signal.
The Foundation: Risk Per Trade
Before any position size can be calculated, you need one fixed number: how much of your total account you're willing to lose on a single trade.
The system uses 2% of total trading capital as the maximum risk per trade (not position size — risk, meaning how much you lose if the stop is hit).
Example: £10,000 account → maximum loss per trade = £200.
This is consistent with professional fund management practice. With 2% risk per trade, you can have 50 consecutive losing trades and still have capital left. That almost never happens — but the psychology of knowing you can survive a long losing streak is what allows you to stick to the rules.
The Half-Kelly Framework
The system's base position size is 10% of trading capital per trade. This is derived from the Half-Kelly criterion applied to the system's backtest results.
The Kelly formula: K% = Win Rate − [(1 − Win Rate) / Win:Loss Ratio]
Using the system's historical numbers:
- Win rate: ~33%
- Average win: ~5.5R (5.5 times the amount risked)
- Average loss: 1R
Kelly = 0.33 − [(0.67) / 5.5] = 0.33 − 0.12 = 21%
Full Kelly (21%) is mathematically optimal but practically dangerous — it assumes edge is perfectly known and permanent. Half-Kelly (10%) provides roughly 75% of the long-run return with much smaller drawdowns. Professional traders almost universally use Half-Kelly or less.
This is why 10% is not conservative — it's mathematically precise.
How Position Size Scales with Score
For the Trend tier, conviction score increases position size:
| Score | Multiplier | Position Size (10k account) | |-------|-----------|---------------------------| | 4/6 | 1× | £1,000 | | 5/6 | 1.5× | £1,500 | | 6/6 | 2× | £2,000 |
Swing and Scalp tiers always use the base position size regardless of score — the faster the tier, the more conservative the sizing.
Volatility Adjustment
The Trend indicator automatically adjusts position size based on current market volatility, measured by ATR vs its 50-day average:
| Volatility | Condition | Position Adjustment | |-----------|-----------|-------------------| | HIGH | ATR > 1.5× ATR(50) | ½ size (5%) | | NORMAL | ATR within normal range | Full size (10%) | | LOW | ATR < 0.6× ATR(50) | 1.25× size (12.5%) |
High volatility means wider price swings = your stop is further away = you buy fewer units to keep the same £ risk.
The indicator displays the current volatility regime and recommended size in the panel. Check it before every entry.
Maximum Open Positions
Never have more than 3 positions open simultaneously.
This cap exists to maintain diversification while ensuring meaningful exposure per position. With 3 positions at 10% each, you have 30% deployed and 70% in cash. At 3 positions at 20% (all 6/6), you have 60% deployed and 40% in cash.
The 40% cash reserve is not laziness — it's the strategic reserve that lets you add to exceptional setups, survive drawdowns psychologically, and enter when others are forced to sell.
How to Calculate Your Entry Size (Step by Step)
The BUY label does this for you automatically, but here's the manual method so you understand what's happening:
- Get the entry price (shown on the label)
- Get the stop price (shown on the label)
- Calculate risk per unit: Entry − Stop = £ risk per coin/unit
- Calculate maximum £ risk: Account × 2% (e.g. £10,000 × 2% = £200)
- Calculate number of units: £200 ÷ risk per unit
- Check against position cap: Number of units × entry price must not exceed your position size cap (10/15/20% of account)
If step 6 is hit first (the position cap kicks in before the 2% risk cap), use the position cap.
The ATR Stop — Why It's Set Where It Is
The stop is not placed randomly. It's placed at:
Trend tier: Entry bar low − 2× ATR(14)
Scalp tier: Entry bar low − 1.5× ATR(14)
ATR (Average True Range) is the average size of a single price bar over the last 14 bars. Multiplying by 2 means the stop is outside the normal range of random price movement — a move that big means something has genuinely changed, not just noise.
A stop placed at 1× ATR gets hit by normal volatility. A stop at 2× ATR is only hit when the thesis is genuinely wrong. This is the difference between getting stopped out of winning trades and getting stopped out of losing ones.
The TP Structure
TP1 = Entry + 2× Risk (2R)
Take 50% of the position off here. Lock in profit. Remove anxiety.
TP2 = Entry + 3× Risk (3R)
Take the remaining 50%, or let the ATR trail run.
Why 2R and 3R?
At 2R, you've taken back double your risk. Even if the remaining 50% hits the stop (now moved to breakeven after TP1), the trade is still profitable. The maths of 1:2 minimum reward-to-risk, applied consistently, is what produces the 5.5× profit factor over many trades.
After TP1: The ATR Trail
Once TP1 is hit (Trend tier), the stop transitions from a static level to a ratcheting ATR trail:
- Calculated as: Highest High Since Entry − 2× ATR
- Updates on every new bar
- Only ever moves up — never back down
- Automatically captured in the indicator — nothing to recalculate
The trail lets winning trades run until the market genuinely turns. The difference between exiting at 3R manually and letting the ATR trail run is often 5R, 10R, or more on Tier 1 trades during bull markets.
What Ruins Otherwise Good Position Sizing
- Adding to losers. Never. One entry, one stop.
- Moving the stop down because the trade "feels right." Feelings are not part of the system.
- Taking profits early on fear. TP1 is where you take 50%, not 100%.
- Skipping the stop. No stop = unlimited downside. Non-negotiable.
- Increasing size after a win. Confidence after a win is not edge. The next trade has the same edge as the last.
Summary
| Metric | Value | |--------|-------| | Risk per trade | 2% of account | | Base position size | 10% of account | | Max position size | 20% (score 6/6 only) | | Max open positions | 3 | | Max deployed capital | 60% | | Stop loss (Trend) | Entry low − 2× ATR | | Stop loss (Scalp) | Entry low − 1.5× ATR | | TP1 | Entry + 2R (take 50%) | | TP2 | Entry + 3R (take 50%) |
Follow this structure on every trade, on every signal, every time. It's not complicated — it just requires discipline.
Murray Money Pro · For educational purposes. Not financial advice.