Hi. I’m using a position size model that gives number of shares to buy depending on my risk and ATR(14)-multiple. #shares = amount risking divided by ATR-factor. I risk 1% of my capital and use 1.5 x ATR. The problem is that with low volatile stocks, this model will give me too big positions compared to my capital. Positions larger than 10% of my capital. Does anyone have a similar model, that uses risk percentage and ATR, but also incorporates totalt capital so that positions will be at maximum 10% of my capital?
I don't use ATR for a stop loss, I use 3 percent below what I see as a support level. But, same concept, your ATR method tells you how much you are risking per share. Then that tells you how many shares to buy. If that comes out to be more money than 10% of your portfolio you simply reduce your number of shares to comply with that rule. Take a look at this spreadsheet. While it is not setup for ATR, you should be able to still put in a price where your stop is at. Notice this sheet takes into account how much percentage of portfolio is and adjusts the shares accordingly. This sheet is view only but you should be able to save your own copy of it and edit. https://docs.google.com/spreadsheets/d/1ElcxkERj_KhGKPPK3Y0hfg0hYY8KdkPj12v80fcvCTE/edit?usp=sharing
Nice! SL could always be a multiple of ATR when I enter it into the sheet anyways, so the first number, according to max risk will be the same as my model. And if number of shares exceeds x% portfolio size I just use your other model, excellent. Thanks.
