One of the simplest ways to compare trading strategies is to test their rules against historical price data using a single futures contract or a fixed number of shares. However, this approach ignores one of the most important elements of trading — risk.

When tested on one contract, a trading system’s performance may be outstanding, but the numbers often aren’t as impressive if you test multiple contracts and apply position sizing rules.

To illustrate this concept, a simple breakout system was tested with and without position-sizing rules.