FIXED RATIO MONEY MANAGEMENT SPREADSHEET
(For all contract based markets)
Incorporating the Fixed Ratio Position Sizing method - as described in the “Money Management – 3 part series” on the main page of this site – for all the Trading Systems, means that the money management is built into the spreadsheet and you are automatically shown how many contracts to trade based on your net profit equity balance (the “delta” level). When you are winning, and your “delta” levels are rising, you trade more contracts. When you are in a drawdown situation and your net profit equity balance drops down into a lower “delta” level, you decrease the number of contracts. All based on your net profit equity balance – not on your % of correct trades or a % of your total equity. This approach can be used with any mediocre or successful trading system, and makes the difference between so, so results, and fantastic results.
As you may, or may not know, Ryan Jones was the author and originator of the term “Fixed Ratio” that is used in his money management approach. He believes very strongly about preserving your starting capital and also about diversification in its role regarding, again, safety of your capital.
His “fixed ratio” approach has to do with improving your trading returns without risking your starting equity. My spreadsheet has accomplished this and the returns have been quite amazing when compared with those returns not using a money management approach.
With this spreadsheet, you have some options:
1. You have an option of just trading the STANDARD approach of 2 contracts per trade all the time, or the FIXED RATIO approach.
2. You can type in what ever your choice is. You not only have the option of trading the STANDARD or FIXED RATIO approaches, but can also make a simple replacement to allow you to trade any system you may be using and only trade 1 contract per trade.
All this without endangering your starting equity! In other words, this money management approach does not kick in until you are well into the black and showing a good profit. Then, there’s no ceiling to the profits you can make. There is no more risk to your trading multiple contracts than if you were to trade just one contract per trade all the time.
With the Fixed Ratio Spreadsheet, you can alter the “delta” profit figure levels to suit your particular comfort level. You can also, with slight modifications, improve the formulae to show results for any particular contract market you may wish to trade.
For more information on this money management approach, click on the “Money Management—3 part series” on the main page of this site.
All this information is shown in detail in the spreadsheet procedural manual that accompanies the actual spreadsheet.