Q: I recently bought your revised version of "Trade Your Way To Financial Freedom" (which is excellent, btw) and realized how important position sizing is. So my question concerns position sizing: In your book you recommend trading several (non-correlated) trading systems. But how do I go about positing sizing the positions that are placed simultaneously by these systems? How much should I risk if I traded multiple trading systems that would risk only 1% of my trading capital in one position if I were to trade only one trading system at a time? Am I doubling my risk if I trade two trading systems simultaneously and thus need to adjust the position sizing algorithm to risk only half of what the trading system would usually risk?

A: How many systems are you trading? Divide your capital equally into the number of systems you have and treat each of them differently. If you want to risk 1% for each system, then do that with the capital allocated to that system. On a quarterly basis, rebalance the systems so that they all have equal capital again.

By the way, I have a much more detailed discussion of this in my new book, The Definitive Guide to Position Sizing, which should be published this fall.