Position sizing: the practical how

The lesson in plain words

The same lesson as the slides above, written out in full.

1. Why size on purpose

Welcome. You already know you should protect your capital, so now let us make that concrete. In this lesson we turn a simple risk rule into an exact number of shares, so every trade carries a size you chose deliberately.

• Position sizing is deciding how many shares to buy, not just what to buy
• It starts from your risk, not from how confident you feel
• The whole method fits in one line: dollars at risk divided by stop distance
• Sizing on purpose is what separates a plan from a gamble

A quick note: This is financial education only, not financial advice. Every number here is illustrative. Do your own research and consider speaking with a licensed professional before making any decision.

2. Step one: your risk budget

Before you think about shares, decide the single most you are willing to lose if the trade goes against you. A common starting point is a small fixed slice of your account, often around one percent. That is your risk budget, and it stays the same whether you feel sure or unsure.

• Pick a fixed fraction of capital to risk per trade, for example 1%
• On a $5,000 account, 1% is a $50 risk budget
• This is the loss you accept only if the stop is hit, not the cash you deploy
• Keeping the fraction constant means confidence never inflates your risk
• Smaller budgets survive losing streaks, and that is the whole point

3. Step two: let the stop size it

Now measure the distance from your planned entry to your stop, per share. Divide your risk budget by that distance and you have your share count. If you risk $50 and your stop sits $2 below entry, you buy 25 shares, because 25 times $2 is exactly the $50 you were willing to lose.

• Stop distance is entry price minus stop price, per share
• Shares = risk budget divided by stop distance
• A $50 risk and a $2 stop distance gives 25 shares
• A wider stop means fewer shares, a tighter stop means more
• The stop is set by the chart, then the size falls out of the math

4. Why consistency protects you

When every trade risks the same amount, no single loss can knock you out, and your results start to reflect your edge rather than one oversized bet. Resist the temptation to size up with borrowed money. Leverage can multiply gains but it multiplies losses just as fast, and margin borrowing charges interest, which we avoid on principle.

• Consistent risk keeps every loss roughly equal and survivable
• It lets your edge show over many trades instead of one lucky hit
• Leverage cuts both ways, and margin interest raises an ethical concern (riba)
• Titan's stance is long-only and defined-risk: your maximum loss is known in advance
• To act on a bearish view, buy a long put and risk only the premium, never short-sell
• Indicators and sentiment gauges are decision-support, never a guarantee