Understanding Position Sizing Beyond 'Risk Only What You Can Lose'

Hey everyone, wanted to quickly touch on position sizing. We all hear 'only risk what you can afford to lose,' but that's a bit too vague for practical application. True position sizing is about determining the number of units (shares, contracts, etc.) to buy or sell based on your predefined risk per trade.

For example, if you decide to risk 1% of your $100,000 account ($1,000) on a trade and your stop-loss for $GLD is $365.00 while the current price is $371.90, that's a $6.90 risk per share. To find your position size, you'd divide your total risk ($1,000) by your risk per share ($6.90), which gives you approximately 144 shares. This method keeps your dollar risk consistent regardless of the asset's volatility or price. It's a fundamental part of capital preservation.