Mastering Position Sizing

We hear a lot of mixed messages when it comes to position sizing.

Some say “Stay small so you can stay in the game longer.”

Others advocate for “Getting big when you have conviction.”

Which is it?

Both.

Jack Schwager has interviewed dozens of successful traders in his market wizards series, and in an interview I found, he was asked the question…

“Tell me about the push and pull of position sizing.”

His answer:

Getting big on your highest conviction trades requires confidence, skill, and expertise.

It’s not for your typical trader.

However, some of the most successful traders would get very big into a trade that met the following criteria:

1. A very high conviction on the idea
2. An asymmetrical risk v reward ratio with an obvious exit point if wrong

(And actually, he mentioned the trade going in your favour immediately too.)

Listen to that segment here.

The link takes you to the right spot (49:58) but it’s all worth a listen.

It’s a great segment and something to ponder over the weekend…