Micro-Futures money management issue with limited capital

• 04/14/2025 at 3:37 PM #245893
  Schizophunk

  Hello everyone,

  I’m currently facing a challenge when coding strategies for Micro Futures (MESXXXX, DXSXXXX, MNQXXXX, MGCXXXX, etc) on higher timeframes like 30-minute, 1-hour, and 4-hour charts, and I wanted to reach out to the community to see how others might be dealing with similar issues.

  The Problem:
  I have a limited capital of $2000 available per strategy, and I’m using a dynamic stop loss based on the Average True Range (ATR). The issue arises because the ATR on these timeframes is often too large, causing the stop loss to be set quite far from the entry point, which results in significant risk exposure for my account. This makes it difficult to maintain proper risk management while still adhering to my strategy, which usually is 1% if the account per trade.

  What I’ve Tried:
  Using microcontracts: I’m trading futures but still finding that even microcontracts can sometimes result in a larger stop loss than I’m comfortable with due to the volatility on higher timeframes.ATR scaling: I’ve tried adjusting the multiplier for the ATR stop loss (e.g., reducing it from 2x to 1x), but it still doesn’t seem to balance the risk properly.

  My Question:
  How do you all manage dynamic stop losses based on ATR when trading with a limited account size, especially on higher timeframes? Do you scale down the ATR multiplier further, or do you have other techniques for reducing the size of the stop loss? Or perhaps you use different instruments (like ETFs or CFDs) for this kind of trading?

  I’d love to hear how others handle similar situations, especially in terms of position sizing and risk management with a limited account.

  Looking forward to your insights and strategies!

  Thanks!

  

  Schizophunk

  Participant

  Topics: 10

  Replies: 20

  Been thanked: 8 times
  04/14/2025 at 9:00 PM #245898
  JS

  It’s definitely a challenge in these highly volatile times…
  If you want to keep your risk exposure under control, my first recommendation would be to switch to CFDs…

  With CFDs, you’re not tied to a minimum of 1 contract—you can, for example, trade the Dow Jones with a minimum contract size of 0,2…
  In these times, you could also consider using a fixed stop loss. You do lose some flexibility this way, but your position size stays manageable…

  2 users thanked author for this post.

  Iván, Schizophunk

  

  JS

  Participant

  Topics: 27

  Replies: 2016

  Been thanked: 1066 times
  04/16/2025 at 1:59 PM #245951
  justisan

  hi,

  “bad” news first – if one is on the good way to profitable trading (which is a rare exception anyway) probably capital will be “always” limited 🙂 Unless one has multiple millions in the pocket one will possibly always have more strategies and will be ready to run them on more instruments with optimal position size than your account size makes possible. so one has possibly to make kind of painful decisions, has to make sacrifices (in terms of diversification). of course to reduce position size in the case you describe would be reasonable solution, but if you trade anyway just 1 micro contract per instrument/strategy, you can only then move your trading to e.g. CFDs where you can trade below 1 contract in order to calibrate your risk according your plan. I figured out since I moved almost all my trading to futures that I don’t want to go back to CFDs – for several very heavy reasons (from my perspective). CFDs and futures trading are in multiple ways not the same thing even if you look at the same instrument, and serious advantages I see mostly for futures trading. and so this is the sacrifice which I make in cases I am not able to run all strategies with planned risk level: I simply don’t trade some, so I have enough/more capital to run the other strategies with intended risk parameters. at least for myself, my psychological comfort I assume it’s better to trade 5 algos with optimal risk parameters than 7 with sub-optimal. And I think, if your strategy A-B-C tells you have to run it with stoploss at ATR with factor X then it’s not good idea to change (reduce) that factor. possibly it’s better not to run that strategy at all – in order to be able to run other strategies with intended ATR-factor.

  I want also to join here JS’s suggestion that possibly good solution might be to have fixed stoploss (fixed amount of index points for all trades of particular strategy on particular instrument) instead of your mentioned dynamic one based on ATR – but it might change your strategy significantly so you have to figure out if it is a solution at all. in fact I run almost all my strategies with such fixed points stoploss 😀 it works for me amazingly well with futures – while it does not necessarily work the same way with CFDs on the same instrument.

  just in case you would like to decide not to trade some of your algos on some instruments: the question is then which strategies/instruments to skip. of course I can’t tell anything about strategies to be skipped, since I don’t know your strategies and how much they contribute to diversification of your trading portfolio, but regarding instruments: less volatile and especially less liquid are probably those which could be skipped. since I trade dax futures I know quite well, that for example micro-dax has terrible liquidity, even mini-dax is far away from liquidity of standard-dax contract. so if I would need to decide I would skip any strategy on micro-dax in favor of strategies which run on micro-contracts on s&p or nasdaq which are definetely more liquid compared to micro-dax and compared to bigger “brothers and sisters” of s&p/dow/nasdaq etc..

  happy traading and cheers!

  justisan

  1 user thanked author for this post.

  Schizophunk

  

  justisan

  Participant

  Topics: 2

  Replies: 131

  Been thanked: 74 times
• Author
  Posts