Example of application: Suppose you want to trade ETHUSDT on a 1 minute chart and you are only willing to risk $10 in one single trade. This way, if you get stopped out, then you will only lose $10. Say you are using ATR based stop loss at 2x current ATR to set the initial stop. All these variables are now fixed, so you must make an adjustment to the size of your position.
Quick illustration: Tolerable loss per trade is $10, the current ATR of ETHUSDT is $4.06, the size of your stop is $8.12 (4.06*2), then your position size should be 1.2 ETH ($10/$8.12).
This script will constantly monitor the current ATR and display the optimal position size on chart. Tolerable loss (aka "Risk amount") is defined by user in settings. Lines showing the size of SL and TPs on chart are optional, it was added to the script to help users draw the long/short position measuring tools built into TradingView.
Other notes: Always consider market liquidity, size of bid-ask spreads, and the possibilities of gap ups/downs. It can never be guaranteed that stop market/limit orders will get filled at desirable prices. Actual stop losses might differ.
릴리즈 노트
⋅
New Feature: Added parameters to allow adjustments for how much one point is worth for specified symbols. Without this filter, the advised position size for certain financial instruments becomes overstated by varying amounts depending on contract specifications (ie. for futures, will be min. tick movement and contract multiplier).
hey there interesting script was wondering how accurate this would be for live trading thank you
DojiEmoji
⋅
@CodyMaki, It does, I ported this to MQL and tested it live on MT5 for a few months now. I've put it out as open source as well, DM for if interested.
But two flaws (1) ATR is still an arbitrary number. Price is random, there is no magic formula that will give you a 'stoploss'. Still, this is better than relying on gut feeling to determine how much to trade, and (2) If ATR decreases during range, then lot size will become extremely large (since ATR is denominator). For this reason, I added a 'max lot size' parameter for EA in MT5.