the trader isnt earning profit that would be earned by employing some other position sizing models. You increase the next positions size to two standards lots to double your potential profit (to cover your previous loss). ATR-based position sizing, actually, it is just an additional rule for the fixed fractional position sizing technique (but can be used with any of them). Calculate fixed fractional position size: 10,000 *.02 2 lots. So you set your position volume.75. If you know traders that still size their positions chaotically, direct them to this article, please :-). The problem is that its very limited and can be quite dangerous (if the fixed size is too high). When a trader sets fixed position size to some large amount compared to the account balance, theres a danger that the account will get wiped out in case of a continuous losing streak.
Martingale gambling system, which involves doubling your bet anytime you lose and was very popular back in XIX century; it is still popular among some gamblers and Forex traders. Ive dropped this method specifically because of that disadvantage, as my ATC 2011 EA often shows significant losses after winning a trade. The biggest of them is that it works poorly with trading strategies that often involve losses after huge wins such position sizing would then increase the loss, decreasing the overall strategys performance. The main idea with risk-based position sizing is to limit the potential loss to some fraction of the account balance based on the stop-loss. Then this position wins you 2,700. For my ATC 2011 EA, ive chosen this type of position sizing because it offers a very fast buildup of balance in the beginning and becomes less aggressive in the end.
As you see, it is a very flexible position sizing system because you can vary the ratio and thus the risk according your preference. This method to adjust position size is extremely adaptive but due to the amount of required calculations is better used with the automated.
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