Stock Trading 101: Learn to Manage Risk with Position Sizing

“If you learn why people lose and thereby control losses, profits will follow” 

 

The above quote comes from the book:  What I Learned Losing a Million Dollars by Jim Paul. The premise of the book is that while there are many ways that people win in the stock market, there are only a few ways that people lose, therefore, rather than study all the disparate “winning systems,” we should seek to understand the small number of ways that market participants lose money and avoid repeating them. It’s a great book and it got me thinking about all the conversations I’ve had with retail traders and investors and how so very few of them talk about their trading plan and how they manage risk…. Guess what! Having no plan and not understanding how to manage risk are two of the ways in which market participants lose money!  Continue reading “Stock Trading 101: Learn to Manage Risk with Position Sizing”