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[Info] [Info] EA position sizing: fixed lot, fixed %, or Kelly?
The same EA can end a year in completely different places depending on how much it risks per trade. Here are the three main approaches compared.
1. Fixed lot
- Always trade the same size, e.g. 0.05 lot.
- Pros: simple, easy to read backtests.
- Cons: profits don't grow as the account grows, and relative risk rises as the account shrinks.
- Best for: early demo and small-account testing
2. Fixed fractional
- Size each trade so a stop-out loses a fixed share, e.g. 1% of the account.
- Lots grow with the account and shrink with it, so it's hard to go broke.
- Formula: lots = (equity × risk %) ÷ (loss per lot at the stop distance)
- Best for: most live EA trading (0.5–2%)
3. Kelly criterion
- Uses win rate and reward:risk to find the fraction that maximizes growth.
- Kelly % = win rate − (1 − win rate) ÷ R:R
- E.g. 55% win rate, R:R 1.5 → 0.55 − 0.45 ÷ 1.5 = 25%
- Theoretically optimal, but drawdowns are brutal in practice, and small errors in your estimates make it dangerous.
- In practice, use ¼ to ½ Kelly, or treat it only as an upper bound.
Comparison (same strategy, one year)
| Method | Return | Max drawdown | Stress |
|---|---|---|---|
| Fixed lot | Medium | Medium | Low |
| Fixed 1% | Medium–high | Low–medium | Low |
| Full Kelly | Possibly very high | Very large | Very high |
Always
- Set a max lot cap on top of the risk %. It stops a calculation bug from sending a huge order.
- If the EA opens several positions at once, work out the total combined risk in %.
- No sizing method saves a strategy without stops.
Part 5 of the "Build an EA" series in Study has ready-to-use code for 1%-risk lot sizing. Copy it straight in.
