Understanding Position Sizing: More Than Just 'How Much'

A lot of new traders focus on the 'what' to trade and the 'when' to enter, but position sizing often gets glossed over, and that's a mistake. It's not just about how many shares you buy; it's a critical risk management tool. Your position size should always be determined by your stop-loss and your maximum acceptable risk per trade, not just your available capital. For instance, if you're risking 1% of your account and your stop on $ASML is set to give you a $50 loss per share, you'd buy fewer shares than if that stop was only $10 away. Get this wrong, and even a solid trading strategy will blow up your account eventually.