The One Thing That Changed Everything: Position Sizing

The Scared Money Problem

FL put it plainly: "After that April drop, I lost a lot of money. I started using stop-losses on every trade... I also started taking targeted profits... The last thing I started doing was not over-leveraging/reducing positioning sizes. This has helped a tremendous amount because I'm no longer nervous, constantly checking my phone or losing sleep over any of my trades."

That last line hits hard. "I'm no longer nervous, constantly checking my phone or losing sleep."

That's what proper position sizing does. It removes the anxiety.

M described his struggle perfectly: "One day, I'll go Ok I want smaller position sizing so I can be in trades longer without risking as much capital. Then the next week, I'll feel like my portfolio is not making gains the way I want so I up my position size, but then I watch those positions like a hawk and then bail too early or stay too late."

This is the cycle so many traders get trapped in. Small sizes feel too conservative when you're winning. Large sizes feel terrifying when things turn.

The Breakthrough

R had one of those years. His account is up 4x, and he's offset all his prior losses. Here's what changed:

"I've endured so many harsh losses and outsized risk positions gone bad that I am now simply unwilling to risk more than I am willing to lose. This is something I adopted from your principles."

He also mentioned marking up charts like I do, which makes journaling easier. But the foundation was risk management that let him sleep at night.

MH, who took a two-year break from trading after COVID-era losses, found her way back: "I have learned to come up with my own rules that help me sleep well at night. Sometimes they are more conservative than your rules, and that's what I needed. I needed to do that to trust myself again."

There it is. More conservative than my rules. And that's exactly right for her.

The Delta Adjustment

JD summed it up beautifully: "If a single stop (or a basket of stops) materially affects your life, you're too big."

Read that again.

If one stop-out would materially affect your life, you're trading too large. Period.

JH shared his approach: "Up until now, I've been trading .1% of my portfolio on each trade. I want to get to trading 1% of my portfolio on each trade but haven't cleared that mental hurdle. I know my gains could be 10x more than what they are now but I also know my losses would also be 10x more than what they are now."

He's up 36% YTD while the S&P is at 16%. Trading at 0.1% per trade.

Let that sink in.

The Confidence Factor

What's fascinating is how position sizing connects to confidence. Not bravado—actual confidence in your process.

C nailed it: "Big things for me this year were: Setting stops on every trade and sticking to them. Funny I didn't realize how big of a deal this was until I just typed it."

He didn't realize it was transformative until he articulated it.

L, who doesn't subscribe but follows my work, wrote: "I learned that smaller position sizes, predefined exits, and focusing on higher-quality setups consistently produced better results than forcing activity."

Smaller sizes. Predefined exits. Higher quality setups.

That's the entire game right there.

The Paradox

Here's what multiple people discovered: trading smaller often leads to trading better, which leads to making more.

PTS described his revelation: "What worked for me was finally accepting that as a married dude with kids and a full time job, I simply don't have as much time as professionals... I've had to accept that I simply can't manage my own 'large' portfolio. In other words, I've realized I can only own so many straight equity, options, etc. Otherwise I get overwhelmed trying to monitor it all."

He traded less. Managed fewer positions. And probably did better because of it.

The Mental Shift

MH described her journey back to trading after a two-year break caused by COVID-era losses: "When I joined your service this year, my goal was just to get back in the game without losing sleep at night. I don't want to be watching the market everyday, and I don't want to lose sleep over one down day or one crazy tweet about nothing. I think I have achieved exactly that."

That's success. Not the P&L—though I'm sure that's fine too. But getting back in the game without losing sleep.

The Lesson

Position sizing isn't about being conservative or playing it safe. It's about creating the conditions where you can actually execute your strategy without emotional interference.

When you're sized properly, you can hold through normal volatility. You can let winners run. You can cut losers without feeling devastated. You can be patient.

When you're oversized, everything becomes existential. Every tick matters. Every red day feels like a crisis. You make emotional decisions because the stakes are too high.

The traders who transformed their results this year didn't necessarily learn new strategies or find better setups. They learned to size positions in a way that let them execute the strategies they already knew.

That's the real edge.

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Sean McLaughlin | Chief Options Strategist, All Star Charts