Position Sizing Quotes

The most important rule is to play great defense, not great offense. Everyday I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum drawdown. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out.

If I have positions going against me, I get right out; if they are going for me, I keep them Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.

Don’t ever average losers. Decrease your trading volume when you are trading poorly; increase your volume when you are trading well. Never trade in situations where you don’t have control. For example, I don’t risk significant amounts of money in front of key reports, since that is gambling, not trading.

And then at the end of the day, the most important thing is how good are you at risk control. Ninety-percent of any great trader is going to be the risk control.

First if all, never play macho man in the market. Second, never overtrade. My major problem was not the number of points I lost on the trade, but that I was trading far too many contracts relative to the equity in the accounts that I handled.

My experience with novice traders is that they trade three to five times too big. They are taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks. The emotional burden of trading is substantial; on any given day, I could lose millions of dollars. If you personalize these losses, you can’t trade.

Risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think your position ought to be, cut it at least in half.

Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I'm getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis... I never think about [stop vulnerability], because the point about a technical barrier - and I've studied the technical aspects of the market for a long time - is that the market shouldn't go there if you are right.

I don't really like hedging. To me, if something needs to be hedged, you shouldn't have a position in it.

I take care of my positions when they come.

Basically, what I do is place a stop, generally 10 to 20 percent below the current price, whenever I buy a stock. The exact level depends on my own analysis of a stock's trading pattern. If a stock violates this stop, I'm out.

There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market.

Trading demands total concentration and the ability to do several things at once while instantly recalling trading prices from the day, or week, before.

There is no point in being confident and having a small position.

The key thing when you short is to make sure you're not wrong on the fundamental intrinsic value.