DIARIES OF A FUND MANAGER

 

 

Trade Position Size Matters

hedge fund money trading Feb 17, 2019

Most traders have the urge to have the biggest position possible when they open a trade. Why wouldn’t they? After all, the only reason they are opening the position is because they feel so confident and certain about it’s outcome.

There are a couple reason why this alone is the very reason most traders fail.

 

1. Big position = High Levels of Exposure = High Levels of Emotion

 

Everyone has the same appetite for reward but not everyone has the same appetite for risk. While some can unflinchingly watch a trade cost their portfolio 10% others already break a sweat watching 2% vanish. If you know that a certain loss size would make you clench your teeth and bring the nerves out, you have to calculate your position size ahead of time to ensure you never get there.

What often happens is that traders sell perfectly good positions at a loss, because they could not handle the trade go against them. If you have a stop, make sure you can stomach the trade going...

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