How to position size based on closed equity

Hi, I have reviewed prior discussions on this to no avail (this might be because of my lack of understanding).

I simply wish to size my positions based on "closed" equity.

My current position sizing formula for open equity is:

PositionSize = -5;

Is there a simple way to do something like:

PositionSize = -5 * (Equity - Open Profit) / Equity

I.e. what I'm trying to achieve is, if say I had $500K in equity, but of this $100K is open profit, then I want to base by position sizing on the $400K.

It's possible what I'm asking is not as simple as I believe it should be. Any guidance would be greatly appreciated.

It is possible with custom backtest, but really not good idea. Why? Because your position sizing would wildely depend on OTHER positions and you might not be able to open position at all. Imagine that you are 90% invested (say 9 open positions out of 10). Now you want to open 5% of "closed" equity. But closed equity is just 10%. 5% from that is 0.5% from entire equity. This together with round lots size may not allow you to enter any position at all and you won't be able to use all money in your account at all. "Closed" equity experiences wild changes as you open new positions. Such volatile component would give you just randomness (unpredictability).

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Hi Tomasz

You make a very valid point - thanks for your input.

Cheers

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