How much pain do you think you can handle?
“Let me tell you something you already know. The world ain’t all sunshine and rainbows. It’s a very mean and nasty place and I don’t care how tough you are it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain’t about how hard ya hit. It’s about how hard you can get hit and keep moving forward. How much you can take and keep moving forward. That’s how winning is done!”
Who doesn’t remember this iconic dialogue between Rocky Balboa and his son?
If your positions move against you, how much you think you can stomach? If the market crashes, how much pain do you think you can handle?
The market will hit your hard sometimes and it’s all about how hard you can get hit and keep moving forward. You can’t lose the battle at the first punch. You’ve got to be alive to play the next round.
This is position sizing in a nutshell.
Our advice today is this: if you are brand new, operate on a level that is at most one-half the level you believe you can tolerate. Take the size of the loss you *think* you can stomach divide it by two.
Create a buffer. Be prudent. Stay in the game.
Chart of the Day
Chef’s suggestion.
How much of a loss can you tolerate? Cut it in half.
