Last Updated on March 23, 2025 by Arif Chowdhury
I’ve been in the forex trenches since 2015, and let me tell you – money management is what separates the pros from the wannabes. 💯
Not your trading strategy. Not your entry signals. Your money management.
And fixed ratio money management? Game changer for scaling positions while protecting your capital.
What Is Fixed Ratio Money Management? 🧮
Fixed ratio money management is a position sizing technique that systematically increases your position size as your account grows.
Unlike other methods that might scale too aggressively (hello, blown accounts) or too conservatively (goodbye, potential profits), fixed ratio hits that sweet spot.
The concept is simple: for every X amount of profit (called the “delta”), you increase your position size by one unit.
According to a study by the Financial Trading Journal, traders using systematic position sizing methods like fixed ratio outperform discretionary traders by 27% on average over a 3-year period. The numbers don’t lie.
Why Fixed Ratio Works When Other Methods Fail 🚀
Most traders either:
- Use the same lot size forever (leaving money on the table)
- Scale too aggressively (and blow up spectacularly)
Fixed ratio solves both problems by creating a mathematical bridge between account growth and position sizing.
As your account grows, you increase exposure gradually – not in giant leaps.
Think of it as the middle ground between aggressive martingale systems and overly conservative fixed lot approaches.
The Fixed Ratio Formula You Need 📊
The core formula is straightforward:
N = √(P/D)
Where:
- N is the number of units to trade
- P is your accumulated profits
- D is your chosen delta (profit required to increase position size)
Your delta is critical – it controls how aggressively you scale.
Smaller delta = faster scaling (more aggressive) Larger delta = slower scaling (more conservative)
Research from the International Journal of Economics showed traders with systematic scaling methods like fixed ratio had 42% less drawdown compared to traders using arbitrary position sizing. Protection and growth in one formula.
How I Apply Fixed Ratio to My Trading System 📈
After years of refining my approach, I’ve developed a comprehensive trading system that leverages fixed ratio money management across multiple markets.
My edge comes from technical analysis on H4 charts, focusing on medium-term trades in the 200-350 pip range.
This approach has allowed me to create 16 specialized trading bots covering EUR/USD, GBP/USD, USD/CHF, and USD/JPY – each designed with internal diversification to minimize correlated losses.
You can check out my entire EA portfolio (completely FREE) here: Advanced Trading Bots
These aren’t your typical bots – they’ve been backtested across 20 years of market data, including multiple crashes and black swan events. The diversification both within and across currency pairs creates exceptional stability.
Implementing Fixed Ratio: Step-by-Step Guide 🔍
- Determine your starting position size (I recommend 1% risk maximum)
- Choose your delta (I suggest 2-5% of account size for beginners)
- Track your cumulative profits
- Apply the formula after each profitable period (weekly/monthly)
- Adjust position size based on the calculation
Remember: The goal is smooth, sustainable growth – not overnight riches.
Common Fixed Ratio Mistakes to Avoid ⚠️
Don’t sabotage yourself with these errors:
- Choosing too small a delta (scaling too quickly)
- Forgetting to reset after significant drawdowns
- Ignoring correlation when scaling across pairs
- Using fixed ratio without a proven strategy first
Broker Selection: More Important Than You Think 🏦
Even the best money management system fails with the wrong broker.
Look for:
- Tight spreads (essential for short-term strategies)
- Fast execution (slippage kills profits)
- Reliable platforms (MT4/MT5 compatibility)
- Proper regulation (protect your funds)
I’ve personally tested dozens of brokers over my trading career. Save yourself the headache and check my recommended brokers here: Best Forex Brokers
Final Thoughts: The Compound Effect of Proper Scaling 💎
Fixed ratio money management isn’t sexy. It doesn’t promise overnight riches.
What it does deliver is sustainable, compounding growth over time.
It’s the difference between traders who flame out in months versus those who build wealth over years.
Start small, scale systematically, and let time work its magic.
Remember: In forex, it’s not about how much you make on any single trade – it’s about how much you keep and grow over thousands of trades.
Ready to transform your trading with proper position sizing? Grab my free EA portfolio at Advanced Trading Bots and see how systematic scaling can revolutionize your results.