andy_moss
3y ago
I write about charts & trading | Chartered Market Technician, pro trader, 22+ yrs Wall St. experience | simplifying technical analysis | not investment advice
What is the #1 Most Important Factor of successful trading?
Do you know what single component of your trading plan will have more impact on results than anything else?
🔹It’s not how smart you are.
🔹It’s not your chart reading skills or some “magic” indicator
🔹It’s not the quality of your fundamental research
🔹It’s not a “Holy Grail” setup.
🔹It’s not how often you’re right or wrong.
✅ It’s how much you make when you’re right and how much you lose when you’re wrong.
That’s it.
đź’Ż Proper position sizing is the most critical factor of successful, profitable trading. đź’Ż
No setup has a 100% win/loss ratio. No system works in all market types.
As traders, we will be wrong. And we will be wrong more often than we are right.
Not many genuinely have a winning percentage of greater than 50%.
Outcomes can vary greatly even in multiple series of trades with identical results.
No one demonstrated that better than Van Tharp and his “marble game.”
@VanTharpInst
"The game works as follows.
🔵 I have a bag of ten marbles.
🔵 Seven marbles are 1R losers.
🔵 One is a 5R loser.
🔵 Two are 10R winners.
The marbles are randomly drawn out of the bag (and replaced) for 30 trades."
"Everyone gets the same trades. After starting with $100,000 the final values can easily range from zero to well over a million dollars.
The only variables important to this game are people’s individual psychology and their position sizing method."
"Your position sizing method produces huge variability in your performance."
-The Definitive Guide to Position Sizing by Van Tharp page 103
https://twitter.com/Andy__Moss/status/1591487997257863168
🤔 Think about that. 🤔
🔹 The same 30 trades.
🔹 The same opportunities for profit and loss.
🔹 Some make millions.
🔹 Some go broke.
So as you continue to learn and improve;
🔹Study the markets
🔹Study yourself
🔹Refine your system
🔹Perfect your execution
But as you work on all that, make sure to spend time learning and improving your position sizing as well.
Getting it right could be the difference between
đź’µ đź’µ making millions
❌ ❌ or going broke.
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