The Algorithmic Advantage 048 - Michael Wallace - Dynamic Position Sizing Like You Haven't Seen Before
Mar 9, 2026
Michael Wallace, a 40-year trader and money manager, explains his probability-driven position sizing and systematic futures/equities strategies. He discusses short-term randomness, sequencing risk, using leverage and hedges to stack returns, and increasing size after drawdowns. Practical money-management ideas tied to Larry Williams and Ralph Vince shape his approach.
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Short Term Price Action Is Mostly Random
- Short-term market moves (day–a few days) are largely random, so patterns you see can be illusionary noise.
- Michael Wallace demonstrates this using coin-flip charts that mimic stock patterns to show apparent trends arise from randomness.
Buy QQQ On 10 Percent Pullbacks On Margin
- Do buy long-term biased ETFs like QQQ on roughly 10% pullbacks and use margin to amplify returns thoughtfully.
- Wallace suggests using a margined $100k to buy $200k of QQQ on dips and hold for compounding gains.
Money Management Can Make or Break A System
- Position sizing and money management can turn losing systems into profitable ones; the system itself may be secondary.
- Wallace cites Larry Williams' slow grind example where identical trades produced loss versus profit solely by sizing rules.
