Reader Chuck writes in:

Hi Gary,

Assuming one has $100,000 available for this trading account.  He uses OCO conditional trading postions, thereby bracketing gain/loss (theoretically), what is your procedure to determine the maximum allowable $$ per trading position and number of positions?

Thank you.

Chuck

Chuck that is a very tough question and depends on a) how long your average position is usually open, b) how much drawdown you're willing to withstand and c) the average number of positions you have open at any one time.

As an example, if you normally have 10 positions open and are willing to sustain a 40% drawdown, you'd then use Equity/10 (to be 100% invested), knowing that if each position was a loser, you'd be down 40%.  

Given that 40% might be unpalatable, you might then use Equity/20.  Anyway, the bottom line is there is no one right answer, and the best answer will come from mining your own data to see what works best!