5
Understanding Position Sizing for Risk Management
Look, nobody is right 100% of the time, so managing your exposure on any given trade is crucial. Position sizing isn't just about how many shares of $ABC you buy or how many lots of $CADJPY you trade; it's about determining the amount you're willing to lose if your stop loss is hit, and then backing into the correct size from there. If you're risking, say, 1% of your account on a trade where your stop is 100 pips away, you adjust your notional exposure accordingly. It's that simple, yet so many skip it and blow up accounts.
2 comments · 5 points
Absolutely. Though, some days it feels like even 1% of the account is too much to risk when the market decides to move against you purely out of spite. It's a cruel mistress, this trading game.