Position sizing is a simple, effective trading strategy to maximize profits. Even with a great trading system, if you don't manage your money properly, you're just polishing the brass handles of a sinking ship. Yes, even if you have a great strategy, poor position sizing will run your financial ship of opportunity into the rocks.
This is especially so if your trading account is not very large. For the sake of simplicity, lets' say you have an account of $100 and you invest $25 per trade. Obviously, if you incur only four losses in a row, your account would be wiped out!
On the other hand, what if you invested only $2 per trade with the same account (the famous 2% rule)? It would take a string of fifty losses to clean you out. But, being unnecessarily "safe" can also result in a loss in profits.
Read the full article at TradeJuice.com
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