Last update: August 2021

≈ What trade size do you carry? ≈

Traders,

Whether you trade stock, options, futures, or forex you have one simple but critical decision to make before you click the send order button. How much money do you put into your trade? 

Position sizing is a concept that is vitally important to understand, build rules for and to consistently apply those rules over time.

Recently, with the volatile moves in the market, there are stories popping up online in chat forums and shared through social media posts and bad journalists about how much money some traders have made on the stock market rally.

Any trader who can build profit, either over time or quickly, the rest of the trading community should applaud them and congratulate them.

But, if you are a veteran trader and you start to investigate some of these claims, one thing is clear: they are over-leveraging in general, trading overly aggressive and the gains are not sustainable.

Remember this bit of advice from wall street:

There are old traders, there are bold traders, but there are no old and bold traders.

Trading in the markets is overly exciting, it is a wonderful skill to develop and it’s something you should be proud to put effort into and build your financial IQ. 

But, if you do not follow basic money management rules, you will eventually learn a lesson that every trader has at some point in their career. Over-sizing and over-leveraging trades will lead to problems at some point.

Greed is real, and when you hear of others’ success, it is natural to want to make those gains as well. But your journey as a trader is all that matters to you, set your personal goals, build your trading business plan, and make sure it includes detailed money management rules.

#TeamTackle

Chart of the Day: Position Sizing Guidelines for Stock and Options trading via the S.T.E.P. System

Stock trading position sizing rules tend to be higher than options trading position sizing rules, because of the leverage that is built into an options contract. Make sure you have built your rules for any product that you trade so that you position size within proper guidelines.

Video of the day

Position Sizing

Disciplined and conservative position sizing is a must, trade small to win big, add to winning trades, reduce position size and exit losing trades and always position size to your personal risk tolerance and follow your step system rules faithfully.

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