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When it comes to managing risk, retail traders often overlook one of the most important keys to success: position sizing.
Many dive into trades with significant portions of their capital, thinking they’ll make a quick profit.
But the reality is that professional traders understand — and respect — the power of position sizing and risk management. These are the tools that keep us in the game and protect us from the sharp downturns that can hit any trade at any time.
For instance, consider someone trading a smaller account with a few thousand dollars.
Even if they’re “managing risk” by keeping each trade small, they’re still often betting more of their capital than a larger fund would. When you’re dealing with millions, or even hundreds of millions, each position is a small slice of the total portfolio.
But when your total capital is a few thousand dollars, one or two wrong moves with too much capital in play can really damage your account.
One essential tip for retail traders is to start thinking like professional traders — to detach a bit from the personal nature of the account and start viewing it as a business. That means not only evaluating trades carefully, but also knowing exactly how much of your capital is at risk in each position.
If you’re trading for consistent results, this is non-negotiable. Don’t get emotionally tied to the trade — think about how it impacts your portfolio as a whole.
Let’s say you’re trading Boeing (BA) or MicroStrategy (MSTR) and you see an entry point that looks great. Instead of jumping in with a big chunk of your capital, break it down.
Decide up front how much you’re willing to risk as a percentage of your account — and then stick to that amount. If the trade doesn’t work out, your portfolio can handle the loss. But if you start doubling down or adding to losing positions without a plan, you’re setting yourself up for a hit you may not recover from.
Most retail traders want the performance of a professional, but that requires developing the habits and disciplines of a pro. Start by building a framework for sizing your positions.
If you’ve got a smaller account, you might allocate a fixed percentage for each trade and avoid putting more than 10% at risk in any single play. The key is consistency — if you stick to your risk plan, you’ll be able to survive the inevitable losing streaks and come out ahead in the long run.
So, make it a habit.
Approach each trade like a professional — detached, strategic, and consistent.
Position sizing and risk management aren’t just ideas… they’re tools that make trading sustainable and profitable. Get these fundamentals right, and you’re on your way to more consistent trading success.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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