What is position sizing & why is it important?
Position size refers to the amount of risk - money, contracts, equity, etc. - that a trader uses when entering a position on the financial market.
We assume, for ease, that traders expect a 100% profit or loss as a result of the profit lost.
Common ways to size positions are:
Using a set amount of capital...
The Kelly Criterion is a formula that calculates the optimal bet size based on known probabilities that maximizes gains while minimizing ruin... or not getting “rekt” .
When we read social media and see infographics of "if you had just invested all your money into THIS you'd have THAT MUCH" it is tempting to dream about how rich we could be just betting BIG ....