- The episode explains capital allocation by trader style: building a diversified portfolio that yields steady results and withstands drawdowns, rather than chasing a single winning trade.
- Four trader styles with typical allocations:
- Conservative: 40–60% in low-risk strategies (stable currencies, synthetic bonds, liquid low-vol ETFs); risk per trade < 2%.
- Balanced: 25–40% in moderately volatile positions; diversification across quality stocks, bonds, and structured products.
- Moderately Dynamic: 15–30% in higher-volatility trades with strict exits and weekly reviews.
- Dynamic/Aggressive: 10–25% in fast-changing trades (scalping, breakouts) with daily limits and correlation monitoring.
- Core idea: mix styles to balance return and risk, reducing dependence on any one profit stream and providing protection during drawdowns.
- Step-by-step method:
1) Define your risk profile and annual return target, plus acceptable maximum drawdown.
2) Identify your dominant style and one or two secondary styles, and decide allocations.
3) Set entry and exit rules for each style (e.g., conservative 1–2% stops; aggressive 3–5% stops with 2:1 or 3:1 targets).
4) Allocate capital across styles (example base: Conservative 50%, Balanced 30%, Moderately Dynamic 15%, Aggressive 5%).
5) Monitor weekly and adjust if trades drift from the plan or drawdowns exceed expectations.
- Practical tips: use copy-trading tools with risk limits and alerts; diversify across markets (currencies, stocks, commodities, crypto); maintain discipline with clear rules and regular result reviews.
- Key insights: risk per trade can be tied to historical volatility, not just position size; the goal is a fixed, manageable exposure per trade.
- Quick start: define your dominant style and return goal, set simple capital allocations with risk rules, and share your 12-week targets and results.
- Bottom line: capital allocation by trader style is a practical map for navigating volatility with discipline and clear review processes, helping you build confidence and consistency.

Remeber you can contact me at
andresdiaz@bestmanagement.org