Risk management isn’t flashy, but it’s essential if you want to succeed as a trader. Most retail traders don’t give it enough attention, and it shows.
They’re quick to put large chunks of capital into trades, only to panic when a position turns against them. Professional traders, on the other hand, take a different approach…
And it all starts with effective position sizing.
Here’s the reality: Smaller accounts are naturally more vulnerable to risk. When you’re managing millions — or even hundreds of millions — every trade is just a fraction of your portfolio. A losing trade doesn’t shake the foundation of the account.
But for retail traders working with a few thousand dollars, even a modestly sized position can represent a significant percentage of their portfolio. One wrong move with oversized exposure, and the account can take a hit that’s hard to recover from.
The solution?
Start thinking like a professional trader. That begins with detaching emotionally from your account. Whether you’re trading Boeing (BA), MicroStrategy (MSTR) or another stock entirely, treat your portfolio like a business.
Your role is to manage it responsibly — to evaluate trades, create a plan and stick to it. If you don’t know how much of your capital is at risk in a given trade, you’re already in trouble.
Let’s break it down…
A solid approach to position sizing means knowing your allocation before entering a trade. For example, let’s say you’re interested in a stock from the Information Technology sector (XLK) of the S&P 500. If you’re working with a $10,000 account, risking 10% — or $1,000 — on a single trade might seem reasonable.
But ask yourself: Can your account handle losing that $1,000 if the trade goes south? For most retail traders, the answer is no.
Instead, scale it back. Keep your risk per trade low — maybe 2% to 5% of your account at most.
This way, even a string of losses won’t wipe you out. If a stock from the Industrials sector (XLI) doesn’t perform as expected, your portfolio stays intact. And by sticking to this approach, you create room for consistency, which is the cornerstone of long-term success.
Here’s a crucial point…
Adding to losing trades is a common mistake that can lead to disaster. For example, if you bought aggressively at one level and the stock drops, doubling down without a plan puts more capital at risk.
Unless you have a massive account and a pre-planned strategy for staggered entries, this approach is too risky for retail traders.
Risk management isn’t about avoiding losses entirely — it’s about controlling them. Effective position sizing allows you to survive the inevitable losing streaks and stay in the game long enough to capitalize on winning trades.
Get it right, and you’ll set yourself apart from the crowd.
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.
P.S. Unlock Hidden Opportunities From Major Stocks During Weekend Downtime
While everyone obsesses over Q3 earnings from Walmart, Target, Nvidia…
Most traders are still missing something huge.
These major stocks — and hundreds more like them — could hand you an extra $915 on average during the days when no one else is trading.
I’m talking about targeting weekend income without buying a single share.
Think about what your weekends could look like…
Place a quick, 2-minute trade on Friday before the market closes.
Hit the golf course or spend time with family…
And come back Monday to potential extra income in your account if everything works out as planned.
According to our backtesting, that’s exactly what would have happened on April 25…
While others waited anxiously for Monday’s market open, anyone who knew about this could have walked away with an extra $917.
The following weekend? Another 2-minute setup led to $1,852 by Monday morning.
Granted, there would have been smaller wins and those that did not work out. but here’s what’s fascinating…
You can target this weekend income from all the big names making headlines right now…
Like AAPL, NVDA, MSFT and More!
The profits and performance shown are not typical, we make no future earnings claims, and you may lose money. The trades expressed are from historical data in order to demonstrate the potential of the system.
