Many traders have no consistency when sizing their positions.

The pros have this down to a science.

Here's my dead simple, 3-step guide to position sizing (and to outperforming 99% of other traders in the process):

Step 1:

Define how much of your account you're willing to risk per trade.

Personally, I never risk more than 1% of my account equity.

If I have $100,000 account, I will never risk more $1,000.

This ensures I will never blow up my account on one single trade.

There are successful traders who risk 2-3% of their account per trade, but I find it most calming to risk 1% or less.

The first step in this process is completely up to you - only you can dictate how much risk you can tolerate.

Step 2:

Look for entries & exits that are within 5% (preferably less) of each other.

This means if I buy a stock & have a 5% stop loss, I can put a 20% equity position on & still be risking 1% of my equity.

Your account will thank you w/ 20% in a stock that goes up 100%.

Step 3:

Position size using this formula:

Total equity (100%) / Trade Stop Loss %

So, if your stop loss is 4%, here's the math:

100% equity / 4% stop loss = 25% Equity Position Size

(assuming 1% equity risk).

Here's another hypothetical calculation:

Why Patience is so Important as a Trader

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Have you ever felt like everyone around you is making money and you're not?

That's how I felt today after the market closed, while I was reflecting on my week.

In fact, over the past three months I've felt like this on multiple occasions!

If we look at my equity curve (EC), updated as of today's close, we can see multiple periods in which my account balance did not change.

Over the past 3 years, I've read 30+ books on trading.

The truth is - majority of them added no value.

Shorten your learning curve by reading these 10 (and toss the rest in the trash):

1. How to Make Money in Stocks

Written by William O'Neil, How to Make Money in Stocks was first published in 1970 & has since become the bible for beginning investors.

Learning CANSLIM from the start of your career will help build habits that will change your life.

2. Pit Bull

Written by Martin 'Buzzy' Schwartz, this book details the story of a man who went from rags to riches in the market.

It will fire you up and help you realize what is possible in the market if you put in the work.

3. How I made $2,000,000 In The Stock Market

In this book we learn the history behind the Darvas Box Theory & again see how hard work makes anything possible in the market.

4. Reminiscences of a Stock Operator

Written by Edwin Lefévre, Reminiscences is a make shift biography about the unique triumphs and pitfalls of the legendary trader Jesse Livermore.

This is my favorite trading book ever & is an amazingly easy read.