This is what ultimately separates the good from the great.
A Guide to Position Sizing
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This is what ultimately separates the good from the great.
It will make a huge difference on your account if you have a 100% gain in a name with 20%+ of your equity.
1️⃣ Position Size Based on Risk
2️⃣ Position Size Based on Number of Edges
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.
▪️ 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.
▪️ 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.
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
▪️ 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
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.
▪️ Conviction drives Position Sizing
▪️ $STUDY of your edges is the only way to build conviction
▪️ Whatever style you choose, you must do it consistently
You can find that here 👇
https://t.co/hcAKEG8WX1
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Let us know how you position size in the comments below 🔽
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