Fixed Ratio money management is a structured strategy that determines when to increase your position size based on accumulated profits rather than risking a fixed percentage of your account. Developed by Ryan Jones, this method aims to grow trading accounts steadily while tightly controlling risk during early stages.

Fixed Ratio money management strategies help traders scale up systematically and reduce the emotional risks tied to inconsistent lot sizing.

What is Fixed Ratio Money Management?

Fixed Ratio money management focuses on controlled position size increases. Instead of risking a set percentage per trade, you only increase your position size once your account grows by a specific amount, known as the Delta.

Key components:

• Delta:
  The amount of profit needed before increasing position size by one unit.
• Starting Size:
  The number of lots or contracts you begin trading with (usually one).

Fixed Ratio Formula:
Increase position size by one unit each time your net profit increases by the Delta.

This method is growth-focused but cautious, ensuring you only scale up as profits justify it.

How to Use Fixed Ratio Money Management

Step 1: Set Your Starting Lot Size
Begin with the minimum standard size, often 1 lot or 1 contract.

Step 2: Define Your Delta
Choose the fixed amount of net profit needed to add one more lot.

Example:

• Delta = £2,000.
• Every £2,000 of net profit = +1 lot.

Step 3: Increase Size as Profits Accumulate

• Start with 1 lot.
• After £2,000 profit → trade 2 lots.
• After £4,000 total profit → trade 3 lots.

Step 4: Maintain or Reduce Size if Necessary
If the account balance falls significantly, you can reduce position size based on predefined rules, ensuring controlled drawdowns.

Step 5: Adjust Delta as You Grow (Optional)
Some traders increase Delta over time to slow down growth and protect larger accounts.

Advantages of Fixed Ratio Money Management

1. Reduces Early Risk
Position size only increases when account growth proves consistent profitability.

2. Controls Emotional Risk
Smooth, systematic growth avoids emotional swings caused by sudden large trade sizes.

3. Compounds Gains Sensibly
As profits build, position size grows at a controlled pace.

4. Easy to Plan and Follow
Clear, rules-based growth plan reduces decision-making stress.

5. Suitable for Small Accounts
Protects smaller accounts from overleveraging while still allowing for accelerated growth when successful.

Challenges of Fixed Ratio Money Management

Slow Early Growth
Accounts may grow slowly initially as position size remains small.

Delta Selection Matters
Choosing a Delta that is too small causes rapid risk exposure; too large slows account growth excessively.

Does Not React to Volatility
Unlike dynamic money management (e.g., Kelly Criterion), Fixed Ratio does not automatically adjust for market volatility.

Drawdown Management
If significant drawdowns occur, rules for scaling back must be clear.

Simple Example of Fixed Ratio Money Management

Net Profit	Position Size
£0	1 lot
£2,000	2 lots
£4,000	3 lots
£6,000	4 lots
£8,000	5 lots

Each additional £2,000 of profit allows you to add one more lot.

Best Practices for Using Fixed Ratio

• Choose Delta Wisely:
  Smaller Delta for aggressive growth; larger Delta for conservative growth.
• Maintain Risk Management Discipline:
  Even as size increases, risk per trade must stay within overall account limits.
• Reassess Delta Periodically:
  Especially as your account grows larger and volatility changes.
• Use alongside Trade Journaling:
  Track profits and lot increases meticulously to avoid errors.
• Have Drawdown Protocols:
  Plan ahead for reducing position size if a significant loss occurs.

Common Fixed Ratio Money Management Mistakes to Avoid

Mistake	How to Overcome
Setting Delta too low	Choose a realistic Delta based on trading strategy and volatility.
Increasing size emotionally	Only increase size when Delta targets are met.
Ignoring drawdowns	Define clear rules for reducing position size after losses.
Forgetting to adjust Delta as account grows	Review and adjust Delta to protect larger accounts.

Avoiding these traps ensures steady and controlled growth.

Examples of Fixed Ratio Management in Practice

• Forex Swing Trader:
  • Starts with 1 lot.
  • Delta = £2,500.
  • Adds 1 lot for every £2,500 of net profit.
  • Slow, steady position size increases protect capital.
• Futures Day Trader:
  • Starts with 1 contract.
  • Delta = £1,000.
  • Aggressively grows position size every £1,000 of profit while monitoring daily loss limits.

Both traders use clear rules to grow their accounts without emotional decisions.

Conclusion

Most traders lose not because of poor entries but because of poor money management. A disciplined Fixed Ratio money management strategy ensures you grow your trading account steadily, increasing position size only when earned through consistent profits. It balances ambition and caution, giving you a professional framework for long-term trading success.

If you are ready to master smart money management strategies, grow your account methodically, and trade with the discipline of a professional, explore our Trading Courses and start building your financial edge today.