1. Position Sizing www.goldenzonetrading.com Fixed Fractional & Fixed Ratio

2. Disclaimer  Golden Zone Trading has no financial interest in the outcome of any trades mentioned herein. There is a substantial risk of loss when trading securities. You need to determine your own suitability to trade them. There may be tax consequences for short term profits or losses on trades. Consult your tax professional or advisor for details on these if applicable. Neither Golden Zone Trading, nor its principles or employees are licensed brokers or advisors. Becoming a subscriber and/or trading any of these lessons or strategies presumes you have fully read and understood the risk involved in trading as set forth below:  Golden Zone Trading offers services and products for educational purposes only. The generic market recommendations provided by us are based solely on the judgment of our personnel and should be considered as such. You acknowledge that you enter into any transactions relying on your own judgment. Any market recommendations provided by us are generic only and may or may not be consistent with the market positions or intentions of our firm and/or our affiliates. Any opinions, news, research, analysis, prices, or other information contained on our website or by presentation of our material is provided as general market commentary, and do not constitute investment advice.  CFTC RULE 4.41 – Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

3. Equity Preservation As a trader our goal is to grow our accounts, manage risk and be consistently profitable. By using proper position sizing we can apply the appropriate size “per trade” as our capital grows. In the event we take a drawdown we can use the same principles to reduce position sizing and risk.

4. Position Sizing Money management & position sizing involves 3 things: 1.Properly sizing your trades based off your account size and risk tolerance per market 2.Not overcapitalizing losing trades 3.Not undercapitalizing winning trades Key Considerations:  Each market has different contract specifications and levels of risk.  Each contract has different tick increments and different $ value per tick/point based on contract specification and size.  Please refer to the TJS trade journal/position sizing templates located in the members area to help with sizing your trades using fixed fractional and fixed ratio money management.

5. Stop Loss Sizes (SDV + PP)  The SDVolumeZones produces different sized zones depending on the market and timeframe used. Larger zones will have more risk Smaller zones will have less risk.  The SDVolumeZones calculates the average stop sizes based on entry preference: First Touch POC (Point of Control) VA (Value Area) VC (Volume Cluster)  The Print Profiler setups use the bar size (+) 1-2 ticks as these are bar close entries that use the bar range as the stop size.  Stop sizes are used for calculating our position sizing and money management decisions using our journal & spreadsheets.

6. Fixed Fractional Position Sizing  Fixed Fractional position sizing assumes that you want to limit each trade to a set portion of your total account, often between 1% and 2%. This represents that each trade will utilize the same % risk on your account which allows you to keep risk a constant factor. Larger SDV Zones will have less position size Smaller SDV Zones will have more position size Both utilize the same % risk you set for your trades. Equation: N = f(Equity/Trade risk) N = Number of contracts to trade f = Fixed fractional % risk you set Equity = Your account balance Trade Risk = The SDV zone size or (entry-stop loss)

7. Fixed Fractional Position Sizing Template

8. Fixed Ratio Position Sizing  Fixed Ratio position sizing's key parameter is the delta. This is the dollar amount of profit per contract to increase the number of contracts by one. A delta of $3,000, for example, means that if you're currently trading one contract, you need to increase your account equity by $3,000 to start trading two contracts. Once you get to two contracts, you need an additional profit of $6,000 to start trading three contracts and so on.  Fixed ratio position sizing was developed by Ryan Jones in his book "The Trading Game“ Equation: N = 0.5*{(1+8*P/delta)^0.5+1} N = Number of contracts to trade P = Total closed trade profit Delta = $ amount/contract to increase account by to increase position size ^ = represents exponentiation; that is, the quantity in parentheses is raised to the power of 0.5 (square root)

9. Fixed Ratio Position Sizing Template

10. Fixed Ratio (Parameter Considerations)  Having a larger “drawdown %” will produce larger risk therefore allowing for more size.  Having a smaller “drawdown %” will produce less risk therefore allowing for less size.  Having a larger “trades to ruin” will allow for more losing trades before reaching your max drawdown % therefore allowing less size and risk.  Having a smaller “trades to ruin” will allow for less losing trades before reaching your max drawdown % therefore allowing for more size and risk.  Both drawdown % and trades to ruin are subjective and individually based on your own risk tolerance therefore they must be selected by you individually to determine your size and risk tolerance.