# Position Sizing

> Calculate risk-based position sizes using fixed %, fractional Kelly, ATR-hybrid, or volatility methods. Use when determining trade size, managing account risk, adjusting for correlated positions, or standardizing risk across trades.

- **Type:** Skill
- **Install:** `agentstack add skill-ske-labs-agent-trading-skills-position-sizing`
- **Verified:** Yes — security-reviewed for prompt injection and unsafe behavior
- **Seller:** [SKE-Labs](https://agentstack.voostack.com/s/ske-labs)
- **Installs:** 0
- **Category:** [Agent Skills](https://agentstack.voostack.com/c/agent-skills)
- **Latest version:** 0.1.0
- **License:** Apache-2.0
- **Upstream author:** [SKE-Labs](https://github.com/SKE-Labs)
- **Source:** https://github.com/SKE-Labs/agent-trading-skills/tree/main/skills/risk-management/position-sizing

## Install

```sh
agentstack add skill-ske-labs-agent-trading-skills-position-sizing
```

Requires the [AgentStack CLI](https://agentstack.voostack.com/docs/cli). Works with Claude Code, Cursor, and any MCP-compatible agent.

## About

# Position Sizing

Position sizing determines how much capital to risk per trade -- the single most important factor in long-term survival.

## Sizing Methods

### 1. Fixed Percentage Risk (Default)

`Position Size = (Account x Risk%) / (Entry - Stop)`

Example: $10,000 account, 1% risk, entry $100, stop $95 => $100 / $5 = 20 shares.

### 2. Volatility-Based (ATR)

`Position Size = (Account x Risk%) / (ATR x Multiplier)`

| Market Volatility       | ATR Multiplier | Effect                       |
| ----------------------- | -------------- | ---------------------------- |
| Low (ATR  80th pctl)  | 2.5-3.0        | Wider stop, smaller position |

### 3. ATR-Hybrid (Recommended for Advanced)

Combines fixed % risk with ATR-based stop distance: `Position Size = (Account x Risk%) / (ATR x Multiplier)`. Adapts to volatility while maintaining consistent dollar risk per trade.

### 4. Fractional Kelly Criterion

`Full Kelly % = W - (1 - W) / R` where W = win rate, R = avg win / avg loss.

**Never use full Kelly.** Use a fraction:

| Kelly Fraction   | Risk Level          | Who Should Use                       |
| ---------------- | ------------------- | ------------------------------------ |
| Half Kelly (50%) | Aggressive          | Experienced with >100 trade sample   |
| Quarter Kelly    | Moderate            | **Recommended starting point**       |
| Tenth Kelly      | Conservative        | Learning, small sample size          |

Quarter Kelly achieves ~75% of full Kelly's growth rate with far less drawdown risk.

## Method Selection

| Situation                             | Method                         |
| ------------------------------------- | ------------------------------ |
| Starting out, 0.7)  |
| Daily loss limit   | 3-5% of account -- stop trading              |
| Weekly loss limit  | 5-8% -- reduce to 50% size, review           |
| Monthly loss limit | 10% -- 1 week break, resume at 25% size      |
| Pre-event          | Cut 50-75% before Score >= 8 events          |

## Workflow

1. **Get entry and stop loss** from the technical analyst's analysis
2. **Check committed risk and balance** via `get_portfolio_risk_state()` (remaining R budget, margin used)
3. **Check for correlated positions** -- are existing positions in correlated assets?
4. **Select sizing method** based on situation (see table above)
5. **Preview the size** via `preview_position_size(symbol=, side=, entry=, stop_loss=, risk_usd=)` — returns quantity, leverage, notional. Use it to sanity-check before creating the insight.
6. **Verify against limits** -- single trade )` — sizing is recomputed server-side; `preview_position_size` is advisory only.

## Key Rules

- NEVER use full Kelly -- quarter Kelly achieves ~75% of the growth with survivable drawdowns
- NEVER size based on conviction -- "I'm really sure" is not a sizing method
- NEVER increase size after losses to "make it back" -- revenge sizing is the fastest path to ruin
- NEVER hold full size into FOMC/NFP/CPI -- reduce pre-event, always
- Correlated positions (>0.7) are a single bet -- 5 long tech positions at 1% each = 5% in one sector
- Use the same method consistently; do not switch based on recent results
- Start with quarter Kelly, not half; track every trade for Kelly inputs

## Related Skills

- **correlation-risk** -- correlated positions must be sized as combined exposure
- **stop-loss-strategies** -- stop distance is a direct input to position size calculation

## Source & license

This open-source skill is cataloged on AgentStack and links to its original source — we do not rehost the code.

- **Author:** [SKE-Labs](https://github.com/SKE-Labs)
- **Source:** [SKE-Labs/agent-trading-skills](https://github.com/SKE-Labs/agent-trading-skills)
- **License:** Apache-2.0

Install and usage instructions live in the source repository linked above.

## Pricing

- **Free** — Free

## Security capabilities

Automated source analysis of v0.1.0 — what this tool can access:

- **Network access:** no
- **Filesystem access:** no
- **Shell / process execution:** no
- **Environment & secrets:** no
- **Dynamic code execution:** no

*"Yes" means the capability is present in the source — more access means more to trust, not that it is unsafe.*


## Versions

- **0.1.0** — security scan: passed — Imported from the upstream source.

## Links

- Listing page: https://agentstack.voostack.com/l/skill-ske-labs-agent-trading-skills-position-sizing
- Seller: https://agentstack.voostack.com/s/ske-labs
- Browse the marketplace: https://agentstack.voostack.com/browse

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