This feature is used to automatically increase or decrease the number of contracts to match the maximum risk specified in this option. Risk is calculated using the stop-loss distance from the entry price. Therefore, if an order set does not have a stop-loss the number of contracts will be set to zero, for that order set, because the risk can not be calculated. This feature will adjust the number of contracts regardless of how the trade is submitted; auto trading, Dynamic Planning, or the Trade Control buttons. The setting OCO Order set » Quantity Scaling directly affect this feature. Please read OCO Order set » Quantity Scaling carefully if you have adjusted those options.
The risk amount can be entered as a currency value, or as a percentage of your trading account balance. When using ‘% of Account’, the Account Size field above must be set correctly to your actual account balance. The Account Size remains fixed. It is not updated in real-time using traded PnL.
I.E. If the Account Size = $10,000, and Risk Per Trade = 2%, the maximum risk allowed equals $10,000 × 2% = $200. The number of contracts will be reduced or increased to fit that $200 maximum risk.
E.G. #1) If trading the CL (light crude oil) with a 10 tick stop-loss, the number of contracts will be set to 2, because a 10 tick loss equals $100 / contract (1 tick/contract = $10/contract, $10 × 10 ticks = $100/contract).
#2) If trading the CL (light crude oil) with a 12 tick stop-loss, the number of contracts will be set to 1, because a 12 tick loss equals $120 / contract (1 tick/contract = $10/contract, $10 × 12 ticks = $120/contract). 2 contracts would equal a $240 stop-loss which exceeds the the $200 risk.
Forex & Stocks Considerations
Important: The algorithm we use for contract scaling is designed for futures trading. Limitations apply to stock traders who want to trade 100 or more shares, and to forex traders who’s broker requires the full lot size (e.g. entering 1000 contracts = 1 micro-lot) to be entered as the number of lots instead of simply 1 contract for 1 Χ-lot size. The algorithm only supports 99 or less number of contracts when using two or more order sets.
Forex example: Typically, a forex trader enters 1 contract for 1 lot, or 3 contracts to trade 3 lots, and the broker converts the number of contracts to the predetermined lot size. But some brokers allow or require 1000 contracts to be entered to trade 1 micro-lot, or 11ooo contracts will trade 1 mini-lot plus 1 micro-lot. Currently, the algorithm is not designed to detect 1000 contracts as a single micro-lot or 101000 contracts as 1 standard and 1 micro-lot forex trade.
Stocks example: Computers are fast enough to calculate one order set with high numbers of shares. But, if order set A is set to 1000 shares and order set B is set to 500 shares , that creates to many possible combinations for the computer to calculate the adjusted number of shares in a timely manner.
This video has more info on Forex in BlackBird.