What is position sizing?

December 2, 2022

Position sizing is a method used in trading and investing to determine the appropriate size of a trade or investment position. Position sizing involves determining the amount of money that should be allocated to a particular trade or investment based on factors such as the trader’s or investor’s risk tolerance and the level of risk associated with the trade or investment.

Position sizing is an important concept in trading and investing, as it can help traders and investors to manage their risk and to ensure that their positions are appropriately sized relative to their overall portfolio. By carefully sizing their positions, traders and investors can avoid taking on excessive risk and can ensure that their trades and investments are consistent with their overall investment objectives.

Position sizing can be used in a variety of different trading and investing strategies, including both long-term and short-term strategies. For example, a trader or investor may use position sizing to determine the appropriate size of a position in a particular stock, currency, or other asset, based on factors such as the risk profile of the asset and the trader’s or investor’s risk tolerance.

Overall, position sizing is a key concept in trading and investing, and it can help traders and investors to manage their risk and to ensure that their positions are appropriately sized relative to their overall portfolio.

“It is always necessary to jump up and down on the scaffold of knowledge to make sure it is solid .” – David Sloan Wilson

This website is owned and operated by Investor Unity Pty Ltd (ABN: 90 160 624 331). Any advice included in this website or correspondence is general advice only and is based solely on consideration of the investment or trading merits of the financial products alone, without taking into account the investment objectives, financial situation or particular needs (i.e. financial circumstances) of any particular person. In addition to its internal services, Investor Unity is compensated by brokers and other third parties by way of referral/affiliate and/or general partnership arrangements, via its websites and other communications. Investor Unity is genuinely interested in your long-term trading & investment success. We advise you to take all necessary steps to ensure you have a good understanding of the products & services you’re considering investing in – particularly if they involve leverage. While Investor Unity takes every care to ensure that we only deal with the highest quality services, from throughout the industry, past performance is not a guarantee of future performance. Before making an investment or trading decision based on the general advice, the recipient should carefully consider the appropriateness of the advice in light their financial circumstances and should carefully review the PDS of the relevant financial product as provided by your investment broker. Past results are not a guarantee of future performance. Please contact us, to discuss any questions or concerns you may have- we are here to help.