James had a $50,000 account and a genuine edge. His win rate was solid, his system tested well, and he'd strung together six profitable months in a row. So he doubled his position size. Not using any formula — just confidence. Within three weeks, a normal drawdown wiped out four months of gains. The edge was real. The sizing killed him anyway.

The Turtle Traders — trained by Richard Dennis in the 1980s — were taught a precise answer to this problem. They used a unit-based system tied directly to market volatility, specifically the Average True Range (ATR). Position size wasn't a feeling. It was calculated so that one unit risked approximately 1% of account equity. As the account grew, the unit size grew with it — proportionally, not impulsively.

CONCEPTScale position size from actual equity, not peak equity — let verified growth drive the increase.
WARNINGIncreasing size after a winning streak, not after equity growth, is how accounts blow up.
KEY IDEAThe Turtle unit system kept risk constant as a percentage while allowing natural compounding to scale exposure.

The fixed fractional method makes this mechanical. Risk formula: Position Size = (Account Equity × Risk %) ÷ Trade Risk in Dollars. On a $50,000 account risking 1%, maximum risk per trade is $500. If a stop is 50 points away and each point is worth $10, position size is one contract. When the account reaches $60,000, the same formula produces a larger position automatically — no decision required.

Account Growth: Fixed Fractional vs Fixed Lot $50k $65k $80k $95k M1 M3 M6 M9 M12 M15 Fixed Fractional Fixed Lot

The Kelly Criterion offers a more aggressive alternative. Full Kelly = Edge ÷ Odds. A system winning 55% of trades at 1:1 risk-reward produces a Kelly fraction of 10% — often considered too volatile in practice. Most experienced traders use half-Kelly or quarter-Kelly, scaling size up only after equity crosses a defined threshold, such as every $5,000 gain confirmed over at least 20 trades. The Turtles also used a drawdown rule: if equity fell 10% from a peak, unit size was recalculated downward immediately. The maths of Kelly Criterion position sizing, the mechanics of Turtle trading rules, and the foundations of fixed fractional money management all point to the same discipline: size is a function of verified equity, never optimism.

Size up when the account balance confirms it — not when the last trade felt good.

This content is for educational purposes only and does not constitute financial product advice. Past performance is not indicative of future results. Profit Logic Ltd (ACN 688 669 936) accepts no responsibility for errors or omissions in this content or anywhere on this website. Always seek advice from a licensed financial adviser before making investment decisions.