Position Sizing for Automated Futures, Done Right

Position sizing is the quietest decision in automated trading and the one that does the most damage when it is wrong. It has nothing to do with how good a trade looks or how confident you feel. It is arithmetic: how many contracts, tied to how much you can afford to lose, tied to the account you are trading.

Position sizing is a number, not a feeling

Sizing to confidence is discretionary trading's oldest mistake, and it survives into automated trading because it feels responsible. It is not. In a rule-based system there is no "this one looks good," because you do not see the trade before it happens and every trade is sized the same way in advance. The only lever you control is how many contracts ride on each signal, and you set it against your account size and the drawdown you can survive, never against a hunch about the next few trades.

Confidence is not a position size. Your account is.

What one contract actually risks

The realized figures over the backtest come in a little tighter, because not every trade runs all the way to its stop or its target. What does not move is the shape: the target is three times the stop on every entry, so breakeven sits at a 25% win rate. That combination, a system that does not need to be right most of the time because it wins bigger than it loses, is the whole engine, and how it holds together is covered in risk, reward and win rate.

Account size sets the ceiling on contracts

Read the last two columns, not the first. The drawdown is what scales with you, trade for trade, and the right-hand figure is the one that ends accounts. Note that the average annual drawdown and the worst of the period are not the same number, and that it is the worst one you have to survive.

Double the contracts, double the drawdown

So the question is never "how much could I make." It is "how deep a hole can I sit in without switching the system off or tripping the account's drawdown rule." A drawdown ends more accounts than a bad strategy does. Start with what drawdown is before you settle on a contract count.

The mistakes that come from sizing to feeling

Almost every sizing failure is one of these three, and all three are the same error wearing different clothes.

• Sizing up to make it back. Three losses in a row, so you add contracts to recover faster. The system has no memory, and neither does the market. The next trade is not more likely to win, so all you have done is deepen the drawdown you were trying to escape.
• Sizing up because it feels safe. A hot stretch, so you leverage into it. Same mistake, reversed. A good run is not a mandate to add risk, it is the average showing up early.
• Overriding the size on a "good" trade. In an automated system you do not see the setup before it fires, and single-trade discretion is exactly what you paid the system to remove. Reinstalling it by hand defeats the point.

The system removes the decision to enter. Position sizing is the one real decision it leaves you, which is exactly why it should be the most boring part of your operation.

A worked example

If the answer is no, then High is the wrong level for you, whatever the account permits. Drop to Medium, or to Low. The permitted maximum is a ceiling, not a target, and the trader who treats it as a target is the one who does not survive the first ordinary bad stretch. The broader picture is in how much a trading bot actually makes, and the instrument itself in how to trade futures.

Frequently asked questions

How many contracts should I trade?

Start with the smallest level the report publishes, Low, and move up only when the drawdown column stops worrying you. Your account's contract cap is a ceiling, not a recommendation. The right number is the largest one whose scaled drawdown you could sit through without switching the system off, which for most people is smaller than the ceiling.

Can I increase size after a good month?

You can, but a good month is not a reason to. The system has no memory and the market does not owe you a repeat, so changing size based on recent results is discretionary sizing wearing an automated system's clothes. Scale on account size and tested behavior over time, not on a streak, or you will reliably be largest right before the average reasserts itself.

What is the risk per trade on one micro contract?

Educational content, not investment advice. Trading futures involves substantial risk of loss and is not suitable for every investor. Any reference to Algomyth results is hypothetical, simulated over historical data, and shown in full on the performance page; past performance does not guarantee future results.