Trade Sizing
Overview
Trade sizing is the typical method of day traders and others who do not use quantitative methods to do portfolio construction.
Traders will typically determine buy or sell signals for assets, then allocate funds based on whether the asset is a buy or not.
Trade sizes are typically determined to be a certain percentage of available capital (typically around 2%), and
the trader will usually put stops on the order.
It is common that any buy will be assigned the same (pre-defined) percentage of capital, however, at times traders
will define a range of exposures.
Setting Exposure Limits
Exposures are calculated to maximize the probability of achieving two objectives
These two objectives are in opposition to each other. If the risk constraint is set too low, the probability of hitting
a high return target becomes small.
