Position sizing is the true secret behind consistent profitability. If position sizing is incorrect, even a strategy with 80% accuracy can blow your trading account.
Position Sizing Formula
Never determine position size by gut feeling. Always calculate shares using the exact mathematical equation:
The Golden Sizing Formula:
Position Size (Quantity) = (Account Capital * 1%) / (Entry Price - Stop Loss Price)
With this simple rule, even a freak flash crash hitting your stop loss ensures you lose only 1% of your overall capital, preserving 99% of your ammunition to trade another day.
