Concept
Sizing Bases
Sizing Bases, also known as equal-R, percent-of-equity, fixed-dollar, notional-vs-risk, are Risk, Sizing & Exits concepts. The Library holds 3 implementations, each one a working definition you can pull into Quant.
Top Sizing Bases indicators
3 total
What are Sizing Bases?
A sizing base is the reference quantity a position's size is computed from, and naming it is the first decision in any sizing scheme. Risk-based bases measure loss at the stop: equal-R keeps the same dollar risk on every trade, and percent-of-equity risks a fixed fraction of the current account, the fixed fractional rule. Notional bases measure exposure instead: a fixed dollar value, fixed lots or shares, or leverage rules that cap position value at a multiple of equity.
The distinction that matters most is notional versus risk. A small position with a wide stop can risk more than a large position with a tight one, so a leverage cap and a percent-risk rule constrain different things, and written plans commonly state both. The second axis is compounding: percent-of-equity risk grows and shrinks with the account, while fixed-dollar risk stays constant through win streaks and drawdowns alike, which changes how the same strategy's equity curve behaves.
How traders use it
- For plan design: pick the base deliberately. Equal-R keeps journal entries comparable and dollar risk constant through streaks, percent-of-equity compounds with the account, and notional bases suit mandates that cap exposure rather than loss at the stop.
- For conversion: stop distance and per-point value translate between bases, turning a risk budget into shares or contracts, or a notional cap into the implied loss at the stop.
- As the foundation refinements build on: volatility-targeted sizing replaces the stop-distance denominator with a volatility estimate, and portfolio-aware sizing adjusts the base for correlated open risk.
Related concepts · Position sizing
Concept family
Risk, Sizing & Exits
37 concepts mapped · 19 in the Library
Sizing Bases FAQ
What is the difference between notional size and risk?
Notional is the market value the position controls; risk is the expected loss if the stop is hit, distance times size. Leverage inflates notional without adding equity, while stop placement sets risk, so the two can diverge sharply: a leveraged position with a tight stop can risk fewer dollars than an unleveraged one with a wide stop, gaps and slippage aside.
Should position size be based on equity or a fixed dollar amount?
They behave differently rather than one being correct. Percent-of-equity compounds: dollar risk rises after gains and contracts in drawdowns, so each loss in a streak removes a slightly smaller amount. Fixed-dollar keeps every trade identical, which is simpler to audit and common under evaluation rules, but a shrinking account then risks a growing share of itself. Decide which behavior the plan actually wants.
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