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
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Let us know how you position size in the comments below 🔽
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The Importance of Trading Rules (Quick thread)
Last week I sent out this poll asking if people have a written
Over 60% of people said they did not have one.
It's now one of my main goals to get as many people as possible to commit to writing their own rules which codify their goals and methods.
I strongly believe that writing down your strategy especially if you are a new trader/investor will lead to improved and more consistent performance in the stock market.
Trading the markets is a tough business, money is on the line and emotions can run high.
Preparing ahead of time is essential so that in the moment you are just executing your plan.
This is the best way to stay in the game for the long haul
Last week I sent out this poll asking if people have a written
Do you have a written Trading/Investing Plan?
— Richard Moglen \U0001f4fd\ufe0f\U0001f981\U0001f6a2 (@RichardMoglen) March 7, 2021
Over 60% of people said they did not have one.
It's now one of my main goals to get as many people as possible to commit to writing their own rules which codify their goals and methods.
I strongly believe that writing down your strategy especially if you are a new trader/investor will lead to improved and more consistent performance in the stock market.
Trading the markets is a tough business, money is on the line and emotions can run high.
Preparing ahead of time is essential so that in the moment you are just executing your plan.
This is the best way to stay in the game for the long haul