“What’s the proper way to think about sizing the position…”

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Mr. Covel,

First off, thank you for your podcast and work around trend following. Your book and mindset on the podcast has helped shape my view of markets since I started as a broker in 2017. For reference, I am a futures broker mainly working with farmers to hedge corn/beans/livestock. I was an engineer for 4 years prior and my mind was opened when I left that corporate world and dove into the markets.

I will try to make my question brief. It is related to position sizing and plugging it into my backtested model. When it comes time to go long an underlying, what’s the proper way to think about sizing the position? Should it be based on total portfolio value, cash value, another route? I’m mostly looking for some guidance before really looking at historical performance, since it will take some effort to find portfolio value at each point in time of each trade.

Context: I am trying to put together a long-only trend system for my 401k/IRA accounts where I can’t go short. It is a basket of ETFs that track the U.S stock market, currencies, treasuries, and various world markets. Currently, I have my backtest showing how each underlying has performed over the years and the trades that were executed. Since I’m not going from long to short, I won’t have all ETFs on at once and there will likely always be a cash position.

Thanks, again, for all your content. I have traded many ways and it’s taken a while for me to finally come around and put in the work to build something. The world has become too volatile and capital preservation into this next point in history is most important. I want to set my kids up for the next turning and be ready to kick some ass by taking a risk.

Brandt H.

P.S. I saw you and Glen Ring go back and forth a while back on Twitter to have him as a guest. I would love to hear that. He’s an interesting guy and I love reading his historical research. He’s wealth of information.

I recommend total. Have you tested all to see the differences?

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