The Money Management Methods tab in the Automatic Strategy Builder (ASB) provides users with various position sizing techniques to optimize their trading strategies. The ASB fully supports all existing money management (MM) methods in FinStudio, allowing for dynamic and adaptable strategy building. Below is a detailed overview of the available MM methods, as listed on the FinStudio Position Sizing page.

Fixed Contract

Functionality: The Fixed Contract method uses a static quantity for trade positions, unaffected by changes in account equity. Traders enter a specific value they wish to trade, and this number remains constant unless manually adjusted.

Fixed Fractional

Functionality: Developed by Ralph Vince, the Fixed Fractional method sizes positions based on a fraction of the account equity. A fixed percentage of the account is risked on each trade, ensuring that the trade size grows or shrinks with the equity, maintaining a proportional risk throughout the trading period.

Profit Fixed Fractional

Functionality: This method modifies the Fixed Fractional approach by incorporating a percentage of the closed trade profit into the initial equity. This two-tier risk management approach increases potential returns while protecting the initial capital.

Fixed Ratio

Functionality: Ryan Jones's Fixed Ratio model scales position size based on performance, allowing for increased aggressiveness during winning streaks and reducing trade size during drawdowns. It focuses on the relationship between growth and risk, modulating position sizes to match account performance.

Measured Fixed Fractional

Functionality: The Measured Fixed Fractional model adjusts position size in response to defined capital growth increments. It protects gains by avoiding the aggressive compounding of some other models, offering a moderate approach to leveraging capital growth.

Implementing Money Management Methods in ASB

To implement these money management methods in the ASB:

1. Select Money Management Method: Navigate to the Money Management Methods tab and choose the desired method.

2. Configure Parameters: Each method allows for specific parameter settings. For example:

   • Fixed Contract: Enter the static trade quantity.
   • Fixed Fractional: Set the percentage of account equity to be risked per trade.
   • Profit Fixed Fractional: Define the percentage of closed trade profit to be added to the initial equity.
   • Fixed Ratio: Configure the performance-based scaling parameters.
   • Measured Fixed Fractional: Set the capital growth increments for scaling positions.

3. Apply to Strategy: Once configured, these methods will be applied to the strategy, ensuring that position sizes are managed according to the chosen money management technique.

Summary

The Money Management Methods section in the ASB equips traders with a variety of position sizing techniques to enhance their trading strategies. By supporting methods such as Fixed Contract, Fixed Fractional, Profit Fixed Fractional, Fixed Ratio, and Measured Fixed Fractional, the ASB ensures that users can tailor their money management approach to suit their trading style and account size. This flexibility promotes effective risk management and optimal position sizing, contributing to the robustness and adaptability of the trading strategies created within the ASB.