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# position sizing when you have short positions in your portfolio

• I have a conceptual question regarding position sizing. So far I have not been margin trading. I have calculated new position sizing as a function of my account value. Namely I have sized each position to risk 0.2 % of my account value.
Now I want to add shorting to my strategy. I am not too sure how to calculate new position sizing if I have some short positions in my account. Let us take an example.

1. I start with \$1000 cash. My account value is therefore \$1000.
2. Then I get a short position for \$400 of asset A.
My new account value is \$600, and my new cash value is \$1400.

Let us now consider that I want to get a long position of asset B. If I bought it before I shorted asset A, asset B position size would have been, say, \$200.
If I bought i after I shorted asset A, asset B position size would have been 200*600/1000 = \$120.

Do you guys think this is the right thing to do, or should I have bought in both cases for \$200 of asset B? If you think the latter is better, how would you calculate position sizing? would you calculate it as a function of (account value + absolute value of all short postions) ?

Thanks

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