Understanding the Importance of Position Sizing

Many people often make mistakes with this, especially beginners. Position sizing is determining the size of the position to trade to manage risk. Simply put, don't put all your money into one trade. We need to calculate how much we are willing to lose on each trade compared to our total capital, not just look at the profit potential. For example, let's say you have 100,000 baht in capital and are willing to accept a 1% loss per trade. This means you are willing to lose a maximum of 1,000 baht per trade. If you enter $USLV at 14.90 and set a Stop Loss at 14.4763, it means you are willing to lose 0.4237 per share. Therefore, you should trade no more than 1,000 / 0.4237 = 2360 shares. This is limiting the potential loss in advance. If you don't do this, when the market swings sharply, as seen today with $USLV dropping to 14.4763, you could easily suffer a loss too severe to bear.