Day Trading Tips and Tricks

March 28, 2019

Erich Senft

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Position Sizing – The Greatest Secret to Trading Success

The greatest secret to trading or investing success is in your Position Sizing. It’s a secret because very few people understand and even fewer people know how to use it.

Position Sizing Secret

Stick with me… because a the end of this post I’m going to give you a free tool that shows you how many of the top 5% of traders, profit by using position sizing in their trading.

Trading is one of the GREATEST businesses you can ever get into. You can live and trade whenever you want and answer to nobody. Trading can replace your job income and become a career path you only dreamed about.

But, I will warn you… I had to go through HELL to learn how to be a profitable trader AND I DON’T WANT YOU TO MAKE THE SAME MISTAKES I DID.

One of the reasons I started Indicator Warehouse was because of the knowledge and connections I have throughout the trading industry. I know what works and I want you to have access to that information.

But first, let’s take a trading test.

Trading Psychology and Position Sizing

Click HERE to link to a test that will tell you everything you need to know about YOU as a trader. 

I like to help people and it’s my passion to help traders find out what REALLY works. It took me YEARS to uncover the truth, but I want to save you the AGGRAVATION and TIME of trying to uncover this hidden information.

The first two years of my trading I lost money. The next two years I broke even. There is nothing more AGGRAVATING than working your tail off and not show a profit or even worse – a loss.

During this time, I bought every trading system, seminar, book, or newsletter that made sense to me. I felt like I was trying to catch falling daggers! You get to the point where you don’t even want to pull the trigger because you can’t handle another loss, you don’t trust anybody, and to add insult to injury, you start to doubt yourself.

Doubt leads to constant discovery mode where you look for ANYTHING or ANYONE who can help you be profitable.

But here is where you have to CHANGE or you will go BROKE!

You have to find a trading mentor or somebody who knows what they are talking about – in short order, you have to find a profitable trader who will tell you the TRUTH!

I did not find the truth until I found a coach and mentor who knew how this game really worked. That coach was a man named Van Tharp. Van runs the International institute of Trading Mastery.

Van teaches what professional (profitable) traders do. He has worked with over 5,000 of the best traders in the world. And I can tell you this – All of them use the same secret weapon (position sizing).

Van Tharp created his trading methods based on thousands of profitable traders.  During his research, he noticed they all had different trading methods, but they all did the same thing when it came to managing their trades. Van took his findings and formulated a money management that can be easily followed by anybody who wants to create profitable results. REGARDLESS OF YOU ENTRY POINTS OR YOUR METHODOLOGY, this works for EVERYBODY!

Van teaches what the “Holy Grail” of trading really is… and it’s called Position Sizing.

Position Sizing is what accounts for 90% of your PROFITS!

Position sizing is what separates the LOSERS from the WINNERS!

Make no mistake – profitable traders do NOT care how many times they win or lose with their trading method. The only thing these traders care about is this:

“It doesn’t matter how often you are right or wrong, it only matters how much you make when you are right, versus how much you lose when you are wrong.”

Now, you’ve heard me say this before in prior blog posts,  and if you didn’t believe it, I completely understand – because I didn’t believe it either.

Now, here’s the important part…

If I gave you a system that won 39% of the time and lost 61% do you think it would make money?

You would probably say: “That’s horrible, who would trade that?” or “I can build a better system than that!” or you might even say: “That sucks, how can you possibly make money with that?”

NinjaTrader position sizing

Here were the actual test results from 1 full year of trading:

Number of trades: 797

Winners: 310/797 = 38.9%

Losers: 487/797 = 61.1%

Initial acct: $50,000

Final level: $184,846

Percentage Change +273.7%

Average profitable trade: +2.82x initial money risked

Average losing trade: -1.00x initial money risked

The last two lines are the most important. The risk is $1.00 to get back $2.82.

So, let me ask you this – if somebody said to you: “If you give me a $1.00, I’ll give you back $2.82. Would you do it? SURE YOU WOULD! Well, guess what? That’s exactly how profitable traders use position sizing to make money!

At the beginning of this post, I said I would give you a new tool to help you understand these concepts. Here it is: it’s called the Money Expert. It will show you how managing your risk using position sizing produces profits.

http://indicatorwarehouse.com/moneytool

Run it 50 times and see how many times you make money! 

Pretty soon you should start to ask yourself:  “Do I want to be RIGHT or DO I WANT TO MAKE MONEY?”.

Like ANY other business – YOU HAVE TO MANAGE RISK to be profitable!

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We have a product called TRADE MANAGER

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Position Sizing NinjaTrader Software

The Trade Manager automatically does Position Sizing for ANY chart you have on NinjaTrader.  It only takes a few clicks of the mouse.

Why did we come out with the Trade Manager?

Every trader must ask four questions before they take a trade. These critical questions make up the Money Management process for profitable trading and they need to be asked on every trade you take:

1. Find the trade setup

2. Check the Risk to Reward

3. Determine the Position size

4. Cut losses short and Let Profits Run

Position sizing is the greatest secret to trading success!

March 28, 2019

Erich Senft

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