Sri Lanka — Daily Range and Volatility - Sizing the Position

Step 1 - read the range and the regime

The range column is the average daily high-to-low distance. The regime column compares the recent window with the longer one: expanding conditions call for a wider stop and a smaller size, contracting ones for the opposite. The weekend gap column is the average distance between the Friday close and the Monday open.

Step 2 - convert one lot into money before choosing a size

The same ‘1 lot’ carries very different risk across instruments: in this sample a lot of XAG/USD (Silver) swings about $12,240 on a typical day versus $9 for JP225 (Nikkei 225) — roughly 1,352× the daily exposure. Position size compares fairly only when it is set from the dollar swing, which is what the lot size calculator does.

Step 3 - check the weekday the position will sit through

The weekday breakdown is the same average range split by day of the week over the window. Differences are indicative and a news week reshuffles them, so use it to decide which day a position sits through rather than to pick a direction.

Why the stop comes before the volume

Setting the volume first and then squeezing the stop to fit is how a plan turns into a stop-out, because the stop ends up inside the distance the instrument covers on an ordinary day. Setting the stop first from the measured range, and then solving for the volume, produces a position that can survive normal movement.

The arithmetic is small: stop distance multiplied by the value of one pip or point at the chosen volume gives the money at risk. Adjust the volume until that number matches what was intended, and the stop stays where the instrument says it should be.

What the regime and style columns add

The regime column compares recent volatility with the longer-run figure, so it says whether today is unusually wide or unusually quiet. Widening conditions call for a smaller position at a wider stop, not for the same position at a tighter one.

The style column compares trending with mean-reverting behaviour from the efficiency ratio. It is context for how a position is likely to behave between entry and target, and like everything else on this page it is a measurement of the recent past rather than a prediction.

Two habits that come out of this table

The first is to write the stop distance in money rather than in pips, because money is the unit the account is judged in and pips are not comparable across instruments. The second is to re-read the regime line before increasing size, since an expanding regime silently makes an unchanged position larger in risk terms.

Neither habit needs the table open. They need it read once, and then re-read when conditions change enough that the platform stops matching what was written down.

Reading the weekday column before a Friday position

The weekday breakdown answers a narrow question well: whether the day a position will sit through is usually a wide one for that instrument. It is a reason to adjust size for that specific day, not a schedule to trade by.

For a position that will be open across a weekend, the gap column matters more than the weekday one, because it describes the distance between the Friday close and the Monday open rather than movement inside a session.

Sizing a position from the daily range

1. Find the instrument and read its average daily range, the mean high-to-low distance over the recent window.
2. Decide the stop distance as a share of that range. A stop inside a small fraction of a normal day is likely to be reached by ordinary movement.
3. Convert the stop distance into money using the pip or point value for the volume you had in mind.
4. Compare that figure with what you intended to risk. If it is larger, cut the volume - do not pull the stop closer to fit.
5. Read the regime line. An expanding regime means today is wider than the longer-run average, so the same stop is reached sooner.
6. Check the weekend gap column before holding into Friday, and decide the Friday exposure before Friday rather than during it.

Volatility figures are annualised from daily closes and describe recent behaviour. Past readings do not indicate future movement.

Where this walkthrough goes next