Risk Warning: Enlightened Stock Trading provides educational courses, this may possibly include the supply of factual information and general advice about Securities and Derivatives. Securities and Derivatives trading entails a high level of risk and is probably not suitable for all investors.

, author Max Gunther states that in order to interrupt away from the "great un-rich," an investor must steer clear of the temptation of diversification. This is controversial advice, since most financial advice encourages investors to diversify their portfolios to ensure protection against calamity.



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Though position sizing can be an important notion in most every investment type, the term is most closely associated with faster-moving investors like day traders and currency traders.


I typically am very conservative, and often when starting out a different system to acquire a feel for it will start with a much decreased size and after that increase gradually as I get more comfortable. One technique I take advantage of with my mean reversion day trade was to start at a fixed amount, her latest blog say even as little as 1k for trade size(using fastened % stop loss), then each month if I have made a profit to increase the size.

This way the equity remains constant besides when a position is closed. It doesn’t range with the portfolio closing price daily.

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Position Sizing and Hole Risk Investors should remember that regardless of whether they use correct position sizing, they may well lose more than their specified account risk limit if a stock gaps down below their stop-loss order.



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So playing for meaningful stakes then takes on the meaning of managed speculation rather than wild gambling. If your risk to reward ratio of your potential trade is small plenty of, you could increase your stake. This of course leads into the question, "How much is my risk to reward on any particular trade?

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