Money Management  |  SEP 2007

How Much Money Should You Allocate? by Torbjorn Iwarson

How Much Money Should You Allocate? by Torbjorn Iwarson If this question is niggling at you, consider how risk-averse you are. That may give you the answer you’re looking for. Trying to figure out how much money you should allocate to your trading is a difficult task. How risk-aversive are you? To get the answer, I will look at the traditional stocks and bonds and a trendfollowing method applied to gold, EUR/USD, and the Standard & Poor’s 500, covering different asset classes. THE TRADING SYSTEM I use point & figure for the signals, using 2% sized boxes and three-box reversals. Point & figure was the first method I learned 20 years ago and I have found it mimics the way most professional traders think if they are not using some other system. Using this method on your own trading strategies, you can back-test how much you should allocate to your trading strategy and how much you should keep in other assets such as stocks and bonds.

by Torbjorn Iwarson