Risk and Position Size
The part that decides whether you survive.
Every discussion of entries is beside the point until this one is settled. You do not control whether a trade wins. You control how much it costs when it loses, and that single decision does more for your outcome than every indicator in this section combined. Position size = (capital × risk per trade) ÷ (entry price − stop price) With Rs 10,00,000 of capital, risking 1% (Rs 10,000), entering at Rs 500 with a stop at Rs 480: the risk per share is Rs 20, so the position is 10,000 ÷ 20 = 500 shares. Why small losses matter so much Lose 10% You need 11% to get back to even. Lose 25% You need 33%. Lose 50% You need 100%. Lose 75% You need 300%. The mathematics of recovery is brutal and it is not symmetric. This is why professionals obsess over the size of their losses and amateurs obsess over the size of their wins. Position sizing is entirely within your control It works regardless of whether your analysis is any good It is the difference between a bad year and a finished account It is boring It caps the upside on the trades you were right about Nobody ever felt clever because of it
Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: Charts.