Michael A783 Jackson

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What are fixed fractional and fixed ratio methods in forex money management?

Fixed fractional means risking a constant % of account equity (e.g., 2%) per trade. It adapts size as equity changes—growing with profits, shrinking with losses. Fixed ratio increases size only after achieving certain profit milestones. Example: start with 1 lot, add 1 lot only after $1,000 profit. Fractional is smoother, ratio is more conservative. Pros: both protect against ruin and scale exposure responsibly. Cons: slower growth compared to aggressive models. Institutions prefer fixed fractional, while retail traders often like fixed ratio for psychological comfort. Choosing the method depends on goals—rapid growth vs. steady risk control. Both beat static sizing, aligning exposure with account dynamics.