Comparing position size methods in brazilian futures market

Abstract

Profitable trading systems with high hit rates can become losers when position sizing (PS) is not done correctly. In this research, a profitable trend following trading system was used in which 8 position size methods were implemented to be applied to the brazilian stock exchange futures market, from 05/01/2005 to 05/01/2016. As the performance of the PS methods is closely related to the choice of its parameters, a methodology based in Monte Carlo simulation (MC) has been implemented. The definition of the most adequate parameter was obtained by limiting the drawdown and maximizing the return. The performance analysis of these PS methods is performed based on the return risk ratio (CAR/MDD) and the results indicated that the PS fixed size presented the best result for the methodology using the simulation of MC.