The importance of correct Position Sizing.

Hi Everybody,

Here is a great example of why correct Position Sizing is so important, to keep your losses small and your Profits large.

Here the FTSE 3min had two losing trades, but (this is the important part) the 3rd trade (TS3 sell) made approx +3R (ignoring slippage and commission). So -2R plus +3R = +1R Profit overall. Or in other words, 2 losing trades and 1 winner actually made money overall................

This is the point that so many amateurs traders simply do not get. They all strive a high % if winners (which is actually very very very hard to do for a long time). BUT they do not understand that you don’t have to have a high % of winners to make money, the most important point is that the losses must be kept small, so a number of losses are then cleared and put back into profit again by one big winner.

Here this +3R profit (which was not that big) cleared two prior -1R losses and made money overall............

Most Amateur do not get this, that is why 97% of amateurs fail in this industry............... Bottom line, you must keep your losses small and profits large – it is all about Risk Control........... To become a successful professional trader.

Thanks, Steve