Fixed Ratio Position Sizing, Explained

Fixed ratio position sizing is a rule for adding units after an account has accumulated enough closed profit. It is not a rule for finding trades, and it does not hold percentage risk steady. That distinction is the whole story: a tidy growth schedule can make the same entry system look very different without supplying an edge.

The method is commonly attributed to Ryan Jones's The Trading Game. Both Wealth-Lab's position-sizer documentation and LuxAlgo's fixed-ratio reference describe the same defining feature: size is keyed to accumulated profit and a chosen delta, rather than to a fixed percentage of current equity.

The delta creates a step schedule#

The delta is the profit amount used to earn the next increase in size. Moving from N units to N + 1 units requires N × delta of additional accumulated profit in the schedule described by LuxAlgo and Wealth-Lab. The required increments therefore get larger as size grows.

current size:             1 unit       2 units       3 units
profit needed for next:   1 × delta    2 × delta     3 × delta

That is different from fixed-fractional sizing. Fixed fractional recalculates size from equity and the trade's risk; fixed ratio uses a profit history and a step rule. Wealth-Lab explicitly notes that the fixed-ratio calculation does not directly use account balance or trade risk, while LuxAlgo contrasts its accumulated-profit schedule with equity-based fixed fractional sizing.

The usual appeal is clear enough. With indivisible contracts, a small account can be stuck at one contract under a strict percentage rule. A fixed-ratio schedule may reach its first increase earlier, then demand progressively more profit for later increases. That design rationale and the later slowing of growth are described by both LuxAlgo and Wealth-Lab. It is a convention for scaling, not evidence that faster early scaling is safer or more profitable.

Where the risk hides#

The schedule can give two accounts with the same current equity different position sizes if their accumulated-profit paths differ. Percentage risk is therefore not fixed by construction. LuxAlgo makes that path dependence explicit; Wealth-Lab likewise warns that delta selection is subjective and flags risk for small accounts.

The missing rule is often the important one: what happens after a drawdown. A complete specification needs a reduction rule, not just a rule for adding size. LuxAlgo describes step-down and asymmetric variants, while Wealth-Lab documents ways to reduce size or switch to percent-equity sizing as drawdown deepens (LuxAlgo; Wealth-Lab). Without that rule, two implementations carrying the same label may take materially different risk.

There is no source-based shortcut for choosing a delta. LuxAlgo calls it a risk-appetite dial rather than an optimum, and Wealth-Lab calls its selection subjective (LuxAlgo; Wealth-Lab). A backtest that discovers one attractive delta after trying many is not proof that the number will travel well.

What fixed ratio cannot tell you#

Fixed ratio contains no information about the entry, exit, spread, or future sequence of wins and losses. It can change terminal equity, exposure and drawdown for a fixed set of trades, but it cannot turn a negative-expectancy signal into a positive one. LuxAlgo states the limitation directly; Wealth-Lab's documentation separately treats the method as a money-management component rather than a signal (LuxAlgo; Wealth-Lab).

That is why claims that one position-sizing label is universally superior should be treated cautiously. The outcome is path-dependent: the order of the same trade outcomes can interact with the step schedule differently. The sources explain the mechanism, not a universal performance result. There is no general result here to borrow from someone else's curve.

How you'd actually test it#

Test fixed ratio as a controlled sizing overlay, not as a story about account growth.

1. Freeze the entries, exits, instruments, timestamps and cost model. Change only the sizing rule.
2. Write the complete rule before running it: starting units, delta, when profit is counted, the maximum size, and the exact step-down rule.
3. Compare fixed ratio with constant size and a fixed-fractional baseline using the same initial capital and the same trade list. Do not call a larger risk budget a better method.
4. Charge spread, slippage, commission and financing. The costs that make a backtest honest cannot be skipped because position size multiplies their cash impact.
5. Hold back unseen data before selecting the delta or a cap. The parameter-sensitivity guide explains why a setting tuned on the full record is not an independent result.
6. Report the largest position, maximum drawdown, time under water, exposure and any account-rule breach alongside return. Then reshuffle trade order as a diagnostic and use the Monte Carlo drawdown explainer to frame why one path is not a worst-case path.

For a prop-style constraint, a sizing method has not passed because its ending balance is higher. It has passed only if its full path survives the actual loss limits under costs and unseen data. That is consistent with how realbacktesting verifies cTrader backtests: rules and costs must be reproducible, rather than inferred from a headline curve.

Frequently asked#

Is fixed ratio the same as fixed-fractional sizing?#

No. Fixed ratio advances through profit milestones set by a delta; fixed fractional recalculates from current equity and trade risk. Both LuxAlgo and Wealth-Lab make that distinction.

Does a smaller delta guarantee faster account growth?#

No. A smaller delta causes earlier size increases under the rule, but it says nothing about the quality of the underlying trades or the drawdown that follows. The two source references describe delta as a choice, not an optimal constant (LuxAlgo; Wealth-Lab).

Can fixed ratio be used outside futures?#

It can be adapted to units that can be sized in steps, but its original rationale is clearest where contracts are indivisible. That context is noted by both LuxAlgo and Wealth-Lab.

Takeaway#

Fixed ratio gives you a repeatable way to add size after profit. Whether that rule is survivable is a separate question, and the only honest answer comes from a reproducible test of the whole path.