Fixed Contract MethodÂ
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Introduction to Fixed Contract Method
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The Fixed Contract method within the FinStudio Charts module is a position sizing strategy that offers simplicity and consistency. It provides traders with the ability to maintain a uniform position size across their trades, which can be an essential part of a robust trading plan.
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Functionality
- Constant Trade Size: With the Fixed Contract method, traders predetermine the quantity for each trade. This number is input by the trader and does not change with fluctuations in account equity or market conditions.
- Manual Adjustment: The position size set by the trader remains fixed until the trader decides to change it. There is no automatic adjustment based on profits, losses, or any other factors.
- Straightforward Application: This method does not require complex calculations. The trader decides on the number of units, lots, or contracts to trade and applies this size to each trade.
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Usage
- Disciplined Trading: The Fixed Contract method is especially useful for traders who prioritize discipline over flexibility. By sticking to a predetermined position size, traders can avoid the emotional pitfalls of overexposing themselves after a win or trading too conservatively after a loss.
- Simplicity: New traders or those who prefer simplicity in their trading plan often favor the Fixed Contract method. It eliminates the need to calculate position size for each trade, which can be particularly helpful for those who are still familiarizing themselves with various market conditions.
- Consistent Risk Management: Traders who use a consistent risk management approach, such as always risking a fixed dollar amount per trade, will find this method aligns well with their strategy. It ensures that the risk taken on each trade is constant, making it easier to analyze performance and make adjustments to the trading plan.
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Conclusion
The Fixed Contract method in the FinStudio Charts module is a position sizing tool that caters to traders looking for simplicity and consistency in their trading approach. It removes the complexity of dynamic position sizing and allows for a clear and straightforward risk management strategy. While this method may not capitalize on the compounding effects of a growing account or decrease position sizes in a shrinking account, it offers stability in trade planning, which can be valuable for maintaining a clear and consistent trading strategy.