The Hidden “Leak” In Many Trading Programs…
In poker terminology, a “leak” is a error in behavior that causes you to “leak” your winnings from previous gains back into the pot.
One of the most common leaks I have seen throughout my career as a trading tutor, mentor and edge consultant is the misunderstanding of how position sizing affects account volatility and profitability.
Since an active investor trying to diversify might have open positions in a $300 stock, a $20 stock, a futures market and a Forex position...
It is critical that you have a plan to balance the risks you are taking across all open positions...
If you don't you allow luck to leak into your trading operations and this will produce random account volatility that can really harm your performance and most important, your profit consistency.
In this video, I'll walk you though how we plug this leak in our business...
By scaling positions for constant dollar risk, we put ourselves in a situation where no one trade can help us or hurt us more than any other.
This strips out a lot of emotional traps as you now view each trade as just one piece of a bigger puzzle...
If you position yourself in this manner, you erase any heightened sense of emotional investment in that trades success or failure...
This allows you to maintain a non-emotional state and remain objective and accurate with your analysis as you manage your open positions.