So now you have a portfolio of stocks, and you’ve figured out what fraction of your portfolio to invest in each stock.

But what do you do when their prices change? 🤔

There are 2 main strategies investors use when stock prices change:

1) Fixed Ratio, which we’ll cover in this lesson.

2) Constant Mix, which we’ll cover in the next lesson.

Fixed ratio position sizing is investing more in your profiting stocks, and selling pieces of your losing stocks 💰

To practice fixed ratio position sizing, set a delta or % change in price that your stocks must go UP by to buy more of it, or must go DOWN by to sell some of it

Let’s say you set your delta across all stocks at 20% 📊

When any of your stocks’ price increases by 20%, you should invest more in that stock.

Let’s say you have $100 of Tesla stock, and after they release a new car it suddenly goes up to $120 📈

Congrats! Your investment value has increased by 20%, hitting your delta.

According to Fixed Ratio Position Sizing, you would buy $100 more of Tesla!

BUT, if Tesla's value drops by 20%, you’ve also crossed your delta, and you need to hit the brakes ⚠️

You would sell some of your Tesla position, reducing your investment size but staying in the game 😎

With a fixed ratio strategy, the fractions you decided on initially for your positions are just a starting point.

And as your investment values change, so do those fractions!