10 Minute Read

Tackle Today: Money Management & Position Sizing

August 1, 2022

By | No Comments

«Position Sizing.»

Traders,

This week our attention turns to money management. Over the following five messages, we will share thoughts on position sizing, stop losses, asset allocation, capital efficiency, and portfolio protection.

Position sizing refers to how much money you allocate and risk in each trade. In other words, the size of each position. Thus, position sizing. There are two rules traders commonly create.

First, don’t allocate more than X% of my portfolio in a single position.

Second, don’t risk more than Y% of my portfolio in a single position.

The first rule is about diversification and protects you if a gap or unpredictable decline strikes. Some traders use 10%. Though it depends on the strategies and tickers you’re using. For instance, if you’re buying shares of a broad-based ETF like the S&P 500 (SPY), you can probably allocate a larger percentage of your portfolio than if it were an individual volatile company like AMD.

The second rule is arguably the more important of the two. The amount will vary depending on the types of trades and time frames. A common rule of thumb is to not risk more than 1% to 2% of your entire account in a single trade. Thus, if you had a $25k account, you wouldn’t risk more than $250 to $500 in a trade.

The objective of position sizing rules is to limit the depth of your drawdowns so you can survive them financially and emotionally. Seeing your account decline 8% to 10% once in a blue moon is acceptable. But watching it crater 30% frequently is unnecessary and likely means your position sizing rules need to be adjusted.


🛑 Webinar Tonight! › Tackle Trading 101: What are the Financial Markets with Coach Matt Justice at 8:30 PM EST on YouTube

In this webinar, Coach Matt will introduce to new traders and investors the concept of the Top Down approach to the market. Why do we analyze the indexes? How to determine your market bias? What are sectors and how to spot sector rotations? We cover it all!

Here’s what you are going to learn:
✅ What are the Market Indexes
✅ Learn how to determine your market bias
✅ Learn about Sector analysis
✅ Introduce the concept of Delta Weighting


Video of the Day: Stock and Options Position Sizing Calculator – Gino’s Gems #tradinghacks

Coach Gino explains how he uses the Position Sizing Tool when using the Tackle Trading Trade Journal in this Gino’s Gem.


Chart of the Day: S&P 500 Seasonality

Chart of the Day: S&P 500 Seasonality

August has begun and seasonal patterns suggest bulls temper their enthusiasm. Will this year be different?


Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.

Weekend Reports

Watch the Stock, Options, Commodity, and Forex Reports to help you prepare for the week.


Tackle Trading: Financial Freedom is a Journey. Sign up now for a 15-day free trial.

Financial freedom is a journey

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.


Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.

Chart Modal

Tackle Trading

Holiday Sale

Attention: Beginners and Advanced Traders!

The Annual Holiday Sale is here!

Celebrate the Holiday Season by taking advantage of this generous offer and save up to –60% on these awesome Trading Systems and Coaching Program!

Offer ends in

Days
Hours
Minutes
Seconds