27 Nov Position Sizing and Money Management: The Time Bomb
For some reason, I seem to be getting a concentration of emails from unrelated followers in which traders discuss some implosion they had over the last 2 weeks. Generally, the story involves someone who has been applying my approach (or they wouldn’t be writing to me!) and saw a “turn” and some consistency only to absolutely obliterate their progress in one or two bad days.
I have come to realize that semi-professional (retail) trading is a field that is seriously focused on providing high leverage, fancy tools and encouragement to trade but is seriously lacking in preparing traders for managing what their account can leverage. This is not unlike a competition among providers to get you in the fastest car possible, but failing to explain how to safely operate it, the potential dangers from its power and the fact that you can lose MORE than the value of that fancy, fast car you just bought (liability damage to others and property).
To try to help folks see how the leverage game works, I have put together a survey for a future post. I want to get at least 1,000 responses to it to have a comprehensive sample. The survey is anonymous and does not track your email or other metrics, so be brutally honest and accurate. Here it is:
I will post in detail regarding this subject shortly after the survey is closed. Thanks and I hope it helps you survive your learning curve.