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A Guide to Position Sizing

--- Thread 🧵 ---

 To perform in the market, position sizing needs to be the main focus.

This is what ultimately separates the good from the great.
It will make no difference on your account if you have a 100% gain in a name with only 1% of your equity.

It will make a huge difference on your account if you have a 100% gain in a name with 20%+ of your equity.
There are 2 consistent ways to position size in the markets 👇

1️⃣ Position Size Based on Risk
2️⃣ Position Size Based on Number of Edges
1️⃣ Position Size Based on Risk

Before you take a position in a stock, you must know how much you are willing to lose on a trade.

We recommend never risking more than 1% of your overall account equity on any single trade, especially if you are in the consistency phase.
Example 1:

▪️ Buy Point: $100
▪️ Stop Loss: $99
▪️ Total Risk: 1%

If your max risk per position is 1% of your overall equity, this setup would allow you to take a 100% equity position and still be within your rules if the trade goes against you.
Example 2:

▪️ Buy Point: $50.50
▪️ Stop Loss: $49.00
▪️ Total Risk: 3%

If your max risk per position is 1% of your overall equity, this setup would allow you to take a 33% equity position and still be within your rules if the trade goes against you.
You must still be focused on taking your best setups and capitalizing on your best edges, but understand that your position size is based on allotted risk.
2️⃣ Position Size Based on Number of Edges

To position size based on # edges, you must have a great grasp as to what your edges are in the market.

🔸Strongest edges = biggest size
🔸Weakest edges = lowest size
Examples:

▪️ Highest Volume Ever: Up to 25% of equity
▪️ Volatility Contraction Pattern (VCP): Up to 20% of equity
▪️ IPO Base Breakout: Up to 15% of equity
With the rules above, you could have up to 60% of your equity in a name meeting those three characteristics.

You must still trade with a risk first mindset though, knowing where you will exit the trade and how much of your account you are risking if the trade goes against you.
Things to Remember:

▪️ Conviction drives Position Sizing
▪️ $STUDY of your edges is the only way to build conviction
▪️ Whatever style you choose, you must do it consistently
We also have a great presentation that @anishsikri gave on this topic.

You can find that here 👇

https://t.co/hcAKEG8WX1
@anishsikri If you found this thread to be helpful, please like & retweet the first tweet!

If you want more similar content, please follow us
@TraderLion_

Let us know how you position size in the comments below 🔽

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10 Lessons I Learned While Working With William O’Neil (Thread)

↓

1. The importance of trading psychology and emotional/physical well-being

Trading psychology and physical/emotional well-being is probably one of the least discussed, yet most important aspects of becoming a successful trader.

However, the large majority of traders spend little time if any focusing on this aspect of their trading and instead, dedicate their time to methodology, technique, and “special indicators.”

Start by taking good care of your physical and emotional health.

This means getting enough sleep, eating well, exercising, etc.

Next, pick up a couple of books and study trading psychology. Two excellent books on this subject are, “Trading in the Zone,” by Mark Douglas and “The Psychology of Trading,” by Brett Steenbarger

2. The importance of sound rules to avoid emotional decision making.

Having a sound set of rules that are proven to work is essential to success in the stock market. Why is this so important? Two words. Human nature.
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TraderLion \U0001f981
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@TraderLion_
How Stage Analysis can improve your Trading & Investing 📈📉

Thread🧵

👇

Stan Weinstein's Stage Analysis offers traders a powerful methodology to identify trends in the markets while following strict risk management principles.

1/


First, let's review who Stan Weinstein is and his contributions to the market.

Weinstein is a veteran technical trader who has over 50 years of experience and now works as an advisor for institutional investors.

2/

Stan is well known for authoring "Secrets for Profiting in Bull & Bear Markets" which you can find at the link below.

This book is incredibly well written and gets into the nitty-gritty of his processes in the

So, what is Stage Analysis?

Stage Analysis is used to identify the longer-term trend of a stock or index. There are 4 different stages 👇

The Basing Area, Advancing Phase, The Top Area, and Declining Phase.

4/
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How To Reach Peak Trading Performance (Thread)

Trading is you versus the Market. It’s a one on one battle with a system designed to take your money if you lack discipline and an identifiable edge.

To achieve success and be able to take on this opponent, you must conquer your own faults and work towards incremental improvement.

Learning to trade, analyze charts, and manage risk are skills that you can carry with you for a lifetime.

However before you can reach the performance phase and consistently capture alpha, every trader must go through learning phases.

Your journey begins as a rookie trader, thrust in the midst of a pitched battle between yourself and the market.
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20 lessons from trading legend Stan Weinstein:

Volume is a gauge of how powerful the buyers are... Never trust a breakout that isn't accompanied by a significant increase in volume.

1/20
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TraderLion \U0001f981
TraderLion 🦁
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There are thousands upon thousands of stocks that you can trade.

But how do you narrow it down to the best of the best?

In this thread, we'll highlight the 3 most important steps you need to take to create a Focus List (& how you can apply these lessons immediately)

👇🧵

By the end of this thread, you'll be able to:

✅ Scan quickly and effectively to build a Universe List
✅ Narrow it down further to a Weekly Focus List
✅ Find the best stocks possible to trade

It's that simple so let's jump in.

· Scan quickly and effectively to build a Universe List

🔎 Pullbacks
🔎 Breakouts
🔎 High Volume
🔎 Fundamentals
🔎 Momentum Edges

Here are the criteria you can use in your favorite scanning platform for each:

Pullbacks Edge 🚨:
· Above your favorite Key Moving Average Scan (> 10EMA, 21EMA, 50DMA)
· % Off Highs Scan (< 20%)
· Reverse Pocket Pivot Scan

Breakouts Edge 📈:
· 52 Week High Scan
· Volume > 2x Avg. Scan
· Price > 5% on Session Scan
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Nick Schmidt \U0001f981
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You can spend years looking for the best trading indicator.

Or you can just read this:

I've spent the last 7 years meeting the best traders in the world... and I realized they ALL use the same indicator.

The absolute best trading indicator in the world is your gut.

Like every indicator—before it can give reliable signals—it needs to be studied.

Your intuition only becomes finely tuned after a lot of trials and errors.

Let me explain...

First, we need to understand what intuition is. (that gut feeling)

As traders, intuition is how we make decisions without conscious thought.

Intuition grows (slowly) every time you see the same pattern unfold.

In other words, the more you trade, the more accurate your intuition gets.

Intuition is no different from muscle memory.
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How To Execute when Trading (Thread)

Trading is a matter of preparation, discipline and execution.

Execution is about reacting to what we see on the charts in accordance with what you have already planned out when the market is closed.

The reason we plan our actions beforehand is because our emotions are at a lower state and we are more objective at that point in time.

Many traders often have the same watchlists going into the week but when the opening bell rings and setups emerge, the traders who can execute have the best performance.

Trading execution begins with research and preparation.
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TraderLion \U0001f981
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Top 7 Things You Must Do Differently to Achieve Massive Success as a Trader by Jesse Stine

(Jesse turned $46,000 into $6.8M in 28 months, netting him a return of 14,972%)

🧵👇


Learn How to Sell

🔹 "Most investors spend 99% of their time studying what to buy and when to buy it."
🔹 "If you don't become passionate about the art of selling, you might continually lose a majority of your gains."
🔹"Fear is NOT a profitable sell signal"

Focus on Weekly and Monthly Charts

🔹"Smart money billion dollar hedge funds and institutions base their buy and sell decisions almost exclusively on longer-term weekly and monthly charts."

To make big money, we have to know what big money is doing.

Wait Until Everything Lines Up

🔹"There's only one way to put yourself in a position to hit a grand slam. Wait, wait, & wait some more until most of the technicals line up in your favor. By waiting until EVERYTHING lines up, your odds of massive success go through the roof."

Invest on an Island

🔹"Ignore the noise and make your own decisions."
🔹"By eliminating all the 'noise', you open up the possibility of massive success."
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What to look for when the market gets volatile. (Thread)

↓

The first thing you should be on the lookout for is tight price action in leadership names. During corrective markets, liquidity is low as market participants take a step back due to uncertainty.

This leads to larger price ranges and therefore tight action is a sign that liquidity is returning to the markets.

As certainty returns, price action becomes tighter and more rational.

This type of action is much easier to operate in as a retail trader since it allows you to define risk which is always first and foremost in any trading strategy.

Another key thing to look for is multiple RS days within specific stocks and groups.

RS ( Relative Strength) Days occur when a stock outperforms the market and other stocks during a corrective period.

If you need a refresher on Relative Strength techniques check out this blog post:
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TraderLion \U0001f981
TraderLion 🦁
@TraderLion_
3 Simple Steps to Quickly Grow a Small Trading Account

--- Thread 🧵 ---

1️⃣ Define a Repeatable Edge

A basis of any successful trading system is having an edge over a series of trades.

Without a well studied edge, you cannot succeed in the market.

Example of edges:

Trend system
* Trading during the power trend
* Trading stocks that are in uptrends
* Trading GROUPS that are in uptrends

High Volume Edges
* Highest Volume Ever (HVE)
* Highest Volume in > 1 Year (HV1)
* Highest Volume Since IPO (HVIPO)

2️⃣ Define Entry Tactics from that Edge

Once you have an edge, you need an entry tactic.

Entry tactics are repeatable and definable. You should know your entry and exit points before ever placing a trade.

Examples of entry tactics:

Trend system
🟢 Enter on two closes above a KMA
🔴 Exit on two closes below a KMA

High Volume Edge
📊 High Volume Close
📊 High Volume Support

Edges & Entry tactics have to be repeated CONSISTENTLY to reduce randomness when trading a small account.
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Or find options that move 1,000% in a single day/week?🤯

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Finviz!! Finviz is a free website that I use to scan for stocks.

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