Paraphrasing an answer given by Gareth Soloway to a psychology related question... Question: How do you determine sizing when doing a trade? For example, about two weeks ago you called out RL as a short and it worked out great. But I wish I had committed more. That's a great point so. So the key is this… Number one, you have to be very aware of your own financial risks and tolerances. I would say to always go on the conservative side… What I like to do is I like to say, "Okay, is this a large cap stock? If it's a large cap, what's the biggest drawdown that I could expect in a crazy scenario?" And then I calculate that in my brain and I have to figure out the share size where if I get that drawdown, I can still maneuver in that trade and I'm okay with it—because if you go too heavy, what ends up happening is emotion kicks in, right? So, let's say you go too heavy on even something like AAPL because you were sure it was going to be a winner. So, you picked it up you were expecting to get a dollar bounce on it as a trade, and instead it goes down a dollar. Instead of being able to maneuver, you're panicking and you're like, "Oh my gosh! I'm down, you know $10,000 on this trade and I really only thought I would risk maybe $1000, and here I am!" You could stop out of it, but the point is that your emotion takes over and once emotion takes over as a traitor—you're done! The market owns you. It literally will control you. So what I would say to you in terms of Ralph Lauren, in terms of that call, is start looking and saying: "Alright, look at the facts. What market cap was Ralph Lauren? How much was it down on the day? What was the potential drawdown or pop that I could have experienced in the opposite direction?" And start to kind of formulate a thesis for why or what share size would be appropriate, also taking into account your risk tolerance, right? So, what's your drawdown where you start to panic? Is it just $500 of a loss or is it $1000, etc. And notice how I'm focusing on the loss here. I'm not focusing on the gain. The game will come. You know if you're an 80% trader, gains will come. Again, it's not getting yourself into a position where the emotion takes over. And I always would rather err on the side of caution and win 80% of the time by betting less, but just being consistent, versus going all in and then one of those losses ultimately wipes out six or ten months of my gains.
you missed the mark completely - it's not about work, it's about documentation and substantiation of performance. Do pay attention and try not to get all emotional.
No doubt about it - yes, trading is tough. But I’ve realized that the hardest part isn’t the market, it’s controlling myself. The market will do what it wants, but if I stick to my plan, manage risk, and stay patient, I stand a much better chance.
In this market, you can only rely on yourself and not let in some tempting offers from those who see themselves above others.
i think you missed the insights of one of the biggest and best traders on this forum. there are more jems of trading knowledge on this forum than in any trading book ever published. professional money managers come here to lurk and improve their trading from the archive of knowledge here. it's ok though like crossing a river in post apocalyptic times, the bodies have to pile up so a few can walk over them and keep their shoes dry. original quote - mark brown
I find the gems analogous to a shot of Scotch mixed in with a gallon of water , neither good Scotch nor good water anymore. Just saying...